July 23rd, 2014 6:28 AM by Jackie A. Graves
What kind of mortgage you can afford and
what kind you can get are important things to know when you begin the
home-buying process. You might have a ballpark price range for your next home,
but you run the risk of setting your sights too high—or too low—without some
additional legwork. Narrow down your range by getting pre-qualification and
abbreviated as ‘prequal’) is a basic overview of a borrower’s ability to get a
loan. You provide all the information, without any kind of paperwork to back it
Pre-approval is more in-depth. The lender will look at
your bank statements, credit score and other information to demonstrate
your financial capability. Neither is a guarantee you’ll get the loan, but a
pre-approval is more reliable and more favorably viewed by REALTORS® and
potential sellers when you start home shopping.
So why get pre-qualified?
It’s quick and can be done online or over the
You’ll know if you can afford a mortgage
It can give you a basic idea of what kind of
mortgage you can get
A Good Idea, Not the Final
While pre-qualification is
relatively easy, don’t rely entirely on that information. Mistakes can be made
and discrepancies can and will be found during the pre-approval or the final approval process.
Being pre-approved is not a
sure-fire way of obtaining a loan, either. For example, if you are pre-approved
one month, but then you take out a loan for a new car next month, you can
damage your ability to get a mortgage. You do not want to change careers, spend
too much money or take out loans during the home-buying process. If you do, you
can hurt your loan eligibility.
While being pre-qualified and
pre-approved won’t guarantee you a loan, it’s recommended you do both. At the
very least, get pre-approved. Many REALTORS® and sellers won’t consider you as
a strong home-buying candidate without a pre-approval letter.
So when you’re looking for a
new home to buy, it’s in your best interest to do the following:
Shop for a home based on your pre-approval
Apply for the loan
If you follow these steps in
order, it can save you a lot of time and aggravation during the mortgage loan
and home buying process.
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