Why You Should Prequalify for a Home Loan
Basically, prequalifying for a loan simply means that you have presented the lender with the facts and documentation required to qualify for a home loan in a specified amount. For example, if you are shopping for a home in the price range of $100,000 and you have 20% to pay up front as a down payment, then you need to learn how to qualify for a home loan in the amount of $80,000. If you need jumbo mortgage loans, your prequalifying amount will need to be larger.
Prequalifying for a home loan does not in any way obligate you to take out a mortgage or loan nor does it mean that you must take the mortgage out with the institution which prequalified you, but often times it makes sense to do so since it saves time and effort by avoiding pulling out all the documentation again.
Where can you learn how to qualify for a home loan? Well, the facts are right here so just follow the steps and do the legwork to get prequalified.
First, obtain a credit report from one of the three major credit reporting agencies. You have the right to obtain one free report per year and you'll want to be sure there are no debts on your credit which were placed there in error. If there are errors on your credit report, work with the credit reporting agency and the creditor to dispute the errors and correct the problems.
Second, communicate with home mortgage lenders. You can do this online or at your local lending institution. You may wish to talk to the bank where you do all your banking or you may find a much better interest rate by shopping around with other lenders.
Third, explain to the lender that you're interested in buying a new home, tell them the loan amount you desire, and that you wish to qualify for a home loan. You will be provided with standard documentation like a loan application which you must fill out completely and accurately. You'll also need to provide proof of income and other requested documentation.
Fourth, await the decision from the lender concerning your qualification for a home loan. Most of the time they can give you an answer within a few minutes while you wait on the phone or in their office. If you already know your credit score is outstanding, then you shouldn't have anything to worry about – you're among a group of people who get the best mortgage rates. While waiting, it's just a matter of time so that the lender can process and research the facts you provided to ensure accuracy and credit worthiness on your part.
The lender will provide a letter or other documentation stating you have been prequalified for a home loan in the amount specified. You can then begin talking to realtors and shopping for a home within the price range prequalified by the mortgage lender.