Pre-qualification is an estimate of how large of a mortgage you can afford. It is the first step when looking for a home to buy. It’s important because it helps you narrow down your options and focus on how much house you can really afford. It is based on your financial situation over the past two years. You will need proof of employment, tax returns from the previous two years (if your self-employed) and a credit report from all three bureaus: Experian, TransUnion and Equifax. You can think of it as a free consultation between you and the loan officer.
The lender will review your income to give you a general idea on how much you can borrow. When you pre-qualify for a mortgage, you are only getting a rough idea of what you can borrow.
You can apply for pre-mortgage approval online by going to the mortgage loan websites.
Here is some example of questions you will need to fill out.
- First and Last Name
- Phone number
- Email address
- Zip code where you currently live
- How soon you’ll be applying for a loan
- Are you currently working with a real estate agent?
- How you would like to be contacted (phone vs. email)
- The purpose of the loan (e.g. purchase vs. refinance)
- The amount you want to borrow
- How you plan to use the loan (primary residence, income property, etc.)
- The type of property you are buying (detached home, multifamily. Condo, etc.)
After providing this information, a representative will contact you regarding your request. They will give you a rough idea how much you can borrow, based on the information you’ve provided. Be prepared for some additional questions regarding your income level.
You can also get a pre-qualification letter. This will let the sellers know that you are serious and that you can qualify for a loan to buy their home.
You can contact other mortgage lenders about your mortgage pre-approval if you want to.
Pre-qualification is not a commitment between you and the lender. The next step is loan pre-approval. Loan pre-approval is a more in-depth version of this process. The lender verifies your income, your debt level, and other aspects of your financial situation. They want to know whether you can qualify for a home loan and decide how much of a loan they are willing to lend you.