Potential home buyers should obtain a pre-qualification letter from their lenders to access a home loan. This letter communicates what the lender thinks about you being qualified for a mortgage up to a certain amount and is dependent on the data you gave about your assets, income, and expenses.
Pre-qualification is just the primary step, and it provides you with an idea of how much of a loan you will potentially qualify for. This process relies on consumer-submitted information.
Getting Pre-Qualified
Pre-qualification entails providing the lender with your overall financial picture, including your credit, debt, income, and assets. The lender evaluates everything and gives you an estimate of the amount you are expected to be able to borrow.
Pre-qualification can be conducted over the phone or via online, and there is no cost attached. It is usually a quick process, taking from one to three days to obtain a pre-qualification letter. Remember that loan pre-qualification does not include a review of your credit report or a detailed look at your ability to buy a home. Instead, it is only dependent on the data you provided to the lender. By extension, it doesn't mean much at all if you provide inaccurate information.
The first step in the pre-qualification process allows you to talk with your lender about any needs or goals you might have regarding your mortgage. Then, your mortgage lender can tell your various mortgage options and discuss the type that might be the most suited for your needs.
Some brokers go the extra mile of requesting home buyers to have pre-qualification before working with them. The letter would signify that a lender has already started talking with the buyer. A properly-written pre-qualification letter clarifies that you are using a quality, legitimate lender who can be reached for verification and confirmation.
According to many real estate agents, in a highly competitive market, a pre-qualification letter might not be enough. This is a significant drawback in using and relying only on a pre-qualification letter for proof of ability to purchase a home. If you need to buy immediately or don't want to miss out on a great deal in a trending area, you may need to be pre-approved as well. Pre-approval is a more complicated process and can impact your credit score, so speak with your agent about which is the better option for your situation.
