Getting Pre-Qualified

The first step to home ownership is prequalification. Prequalification is one key to a successful home ownership experience. It is important to know how much home you can afford and whether you are likely to qualify for a loan. Prequalification increases your comfort level and decreases the stress that can go along with purchasing a home.

It is not necessary to get pre-qualified with a mortgage lender or bank, but it is one step that your real estate agent may ask you to go through before you look at any houses. This helps the real estate agent provide you with home that meet your price range and can save everyone, including you, a lot of time. It also helps to be pre-qualified if you find a home that you truly love and must put an offer in the same day.

The process of pre-qualifying is like going through a trial run of actually generating your loan. A lender will ask for several documents including recent pay stubs, a W-2 form and last year’s tax return. They will then provide you with a form that asks you to list all of your outstanding debts including car loans, credit card debts, student loans and other amounts you must pay every month such as alimony or child support.

The lender will take your information and combine it with your credit report. Your credit report gives the lender information on how well you have paid your bills in the past and they will use this information as a predictor of how well you will pay your mortgage loan in the future. The lender will then provide you with a letter or a form that gives you a price range that you can afford.