Pre-qualification is an informal way to see how much you maybe 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-approval is a lender's actual commitment to lend to you. It involves assembling the financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.
Saturday, February 12, 2011
Benefits of Prequalifying for a Mortgage
Mortgage lenders and real estate professionals repeatedly sponsor prequalifying for a mortgage as the best route for prospective homeowner. Prequalifying establishes how much you can borrow and the price range of homes you can afford to buy.
Prequalification Can Streamline Purchasing Process
Mortgage lenders can prequalify you for a home loan before you start looking at homes. Lenders can help decide what kind of home loan best suits your situation and explain the features and benefits associated with various mortgage options. You can use free affordability calculator tools to get an idea of how much you can afford, but having a lender formally prequalify you for a mortgage loan can give you a "leg up" in the home buying process.
Establishing Affordability: By prequalifying for a mortgage before you start shopping for your new home, you can focus your efforts on houses that you can genuinely afford to buy. You can use free affordability calculator tools online. Being prequalified or preapproved for a mortgage loan can provide leverage with sellers.
Motivating Sellers: Sellers entertaining numerous offers may pay more awareness to offers submitted by prequalified buyers. The sellers know that these buyers have taken the time to shop for mortgage financing and that the sale may close faster.
Saving time (and maybe money): Once you're prequalified, you know which homes you can afford and won’t waste time viewing homes that are out of your price range. Prequalified buyers can make an offer with reasonable certainty that they can get the mortgage financing they need. The lender has already done some of the preliminary work; this can help avoid last minute delays because of mortgage approval issues.
Planning for extra costs: If you're buying your first home it can be easy to overlook additional costs of homeownership. By prequalifying for your mortgage, you'll have an idea of what your mortgage payments will be and can plan for home continuation and repairs, lawn care, and extra function charges. The amount you prequalify for is the highest mortgage sum you can borrow; by considering homes requiring a lower mortgage, you can budget to allow for additional costs associated with owning a home.
Improve Your Negotiating Power: You may need to make a oppose offer when buying a home. Sellers may be more flexible when considering terms of your offer or counter offer as a prequalified buyer.
Streamline the closing process: Prequalified buyers have established a relationship with a mortgage lender and know what to expect in terms of qualifying for a mortgage. Even though prequalifying doesn't eradicate the chance of delays before closing, it can decrease the chance of "surprises" involving your capability to get the mortgage you require.
Prequalification Can Streamline Purchasing Process
Mortgage lenders can prequalify you for a home loan before you start looking at homes. Lenders can help decide what kind of home loan best suits your situation and explain the features and benefits associated with various mortgage options. You can use free affordability calculator tools to get an idea of how much you can afford, but having a lender formally prequalify you for a mortgage loan can give you a "leg up" in the home buying process.
Establishing Affordability: By prequalifying for a mortgage before you start shopping for your new home, you can focus your efforts on houses that you can genuinely afford to buy. You can use free affordability calculator tools online. Being prequalified or preapproved for a mortgage loan can provide leverage with sellers.
Motivating Sellers: Sellers entertaining numerous offers may pay more awareness to offers submitted by prequalified buyers. The sellers know that these buyers have taken the time to shop for mortgage financing and that the sale may close faster.
Saving time (and maybe money): Once you're prequalified, you know which homes you can afford and won’t waste time viewing homes that are out of your price range. Prequalified buyers can make an offer with reasonable certainty that they can get the mortgage financing they need. The lender has already done some of the preliminary work; this can help avoid last minute delays because of mortgage approval issues.
Planning for extra costs: If you're buying your first home it can be easy to overlook additional costs of homeownership. By prequalifying for your mortgage, you'll have an idea of what your mortgage payments will be and can plan for home continuation and repairs, lawn care, and extra function charges. The amount you prequalify for is the highest mortgage sum you can borrow; by considering homes requiring a lower mortgage, you can budget to allow for additional costs associated with owning a home.
Improve Your Negotiating Power: You may need to make a oppose offer when buying a home. Sellers may be more flexible when considering terms of your offer or counter offer as a prequalified buyer.
Streamline the closing process: Prequalified buyers have established a relationship with a mortgage lender and know what to expect in terms of qualifying for a mortgage. Even though prequalifying doesn't eradicate the chance of delays before closing, it can decrease the chance of "surprises" involving your capability to get the mortgage you require.
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