Shopping for a Home - Prequalification

January 23, 2008

Before going out to shop for a home, you really should have a good idea of what you can afford. You can get a general idea of what your payments would be by using one of our mortgage calculators, but to know how large of a mortgage you can actually qualify for, you should talk with a mortgage professional.During the prequalification process, your mortgage professional will take an application and look at your financial situation. You will typically want to provide income and asset documentation. There are stated loan products available if you cannot or do not want to provide documentation, but your rate is typically going to suffer a bit, especially in today’s mortgage market

Your credit will also be a factor in qualifying for a loan. If you are planning on purchasing a home, you may want to look at your credit and see if there are any major issues that need to be resolved. Read my article on credit for some information on how to obtain a free credit report and manage your revolving debt. If there is any room for improvement on your overall credit score, that is going to benefit you in the qualification process.

Once your mortgage professional has this information, they can talk with you about loan options. There are a number of options available, make sure you get all the information about the products being offered and understand the terms. If you are shopping around and get a quote that differs dramatically from what others have quoted, you might want to look into the reasons behind that. If it sounds too good to be true, it usually is.

From this point, your mortgage professional should be able to write you a pre-qualification letter. This does not obligate you to use that particular lender, and also does not obligate them to approve your loan as guidelines do change, but it is a way to ensure that your file has been properly reviewed and that you are shopping for a home that fits your budget. There is typically no fee for pre-qualifications.

Being pre-qualified benefits you in a number of ways. You will typically have more negotiating power with the seller as they will know they are dealing with pre-qualified buyer. You may also be given preference in the case of multiple offers. It will give you credibility with the real estate agent you are working with, as they will know you are a serious buyer and are shopping for a home at an appropriate price point. Finally, in going through the pre-qualification process you may find that you can spend a bit more than you originally anticipated to get into that dream home of yours.

Hopefully this has been helpful. If you are looking for a California Home Loan and would like to get pre-qualified, please don’t hesitate to contact me directly.

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