What is pre-qualification for a mortgage?
Buying a home is the biggest investment most people will ever make. The process of obtaining a mortgage can be long, difficult and confusing. Being pre-qualified for a mortgage allows you to start the process of buying a home with an approximate knowledge of the amount of money the bank may be willing to lend you. Prequalification is a useful tool to make smart financial decisions.
What is prequalification?
Prequalification is designed to measure your financial temperature (gives an idea of how much you can spend on a house). When you seek prequalification, basically you’re asking the bank to validate the fact that, in theory, should be able to buy a house of a certain amount. For example, you can begin the process of buying the house to decide you want to search homes costing about $ 250,000. As part of the prequalification process, the bank will ask about your income, current debts and how much money you need to borrow. Subsequently, the bank will determine if you are eligible for the mortgage you want. If you think you are able to pay, the bank might give you the status of “pre-qualified”. You have no obligation to close the loan with the bank to be pre qualified.
A major confusion in the mortgage process involves the difference between prequalification and pre approval. Prequalification is a simple determination of the bank that you are able to pay a mortgage of a certain amount. In contrast, pre approval is a more thorough process. With pre-approval, the bank has already verified your credit and your income, your assets and your debts, and has made the determination that, if you find a house you want to buy tomorrow, the bank may grant a mortgage. With pre qualification, the bank has not made any commitment, but simply provides a professional opinion on your ability to purchase a home a certain value.
What banks can pre-qualify me?
Almost any bank or broker that offers service can bestow estate prequalification. The process takes just a few minutes. Although you have no obligation to close the loan with the bank that pre-qualifies you, it is logical to perform this process with the bank of your choice. Thus, if you proceed with the foreclosure, the bank will already have your information.
It should not cost you anything to obtain prequalification. Banks usually offer the service for free; after all, you’re becoming a potential customer. If you require payment of fees for prequalification, check with other banks.
How helps you pre qualification
Pre qualification helps you buy a home in different ways. First, it will help you get an idea of the amount of money that will be available. You could fool yourself into thinking you can buy bigger houses, but you can not fool the bank. Second, pre qualification gives you leverage to bid for the purchase of a home . Prove you’re a serious buyer. If anyone selling a home has received an offer from someone who is not pre qualified, the seller may accept your offer. After all, the seller has no insurance that the other party can afford the house.