Why Get Pre-Qualified?
Pre-qualification is an informal way for a lender to review your financial information and estimate how much you may be able to borrow. You can be “pre-qualified” over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.
- Pre-qualifying helps you get real about budget. A pre-qualified mortgage typically provides a ballpark estimate of how much money you can borrow, breaking down what your monthly mortgage payments would be.
- It prevents sand-castle dreams. Yes, the amount you are pre-qualified to borrow will have some wiggle room, but it also will manage your expectations. This is why it makes sense to get pre-qualified before you start house-hunting; it can help you avert the heartache of falling in love with a mid-century-modern that’s outside your budget. Further, your ballpark price will limit the number of homes you tour, saving you time.
- You get on the ground floor of mortgage options. Just as there are many styles of homes, there are many kinds of mortgages. During pre-qualification, you and your lender can discuss which options best suit you.
- It gives you a foot in the door. Think of your homebuying process from the standpoint of the seller. The seller will more seriously consider an offer from a pre-qualified borrower. It shows that you’ve been working with a mortgage agent, and that gets you a step ahead
- You know where you stand without risking your credit. A pre-qualification check of your credit – basically a review of your credit report and credit score – is considered a “soft inquiry” that will not affect your credit rating.