As real estate professionals, we often ask buyers if they are “pre-qualified” for a loan on our first contact. Sometimes, people are taken aback by this very important query. This question is not meant to be an insult; in fact, it is the best way to begin helping you. So why is this important enough for agents to risk potently offending a new client? Why do you need to pre-qualify?
Know Thy Price Point. The pre-qualifying process outlines your current financial situation and determines how much house you can really afford. Do you want to have your heart broken when you find your dream home, but (after applying for you loan) it is well out of your price point? Your real estate professional doesn’t want that for you either. Having an idea of your budget helps your agent narrow down to some of the more suitable options and show you homes in your price range.
Have buying clout. Being a pre-qualified shopper signifies to home sellers you are serious about buying a home. You have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. A ‘pre-qual’ letter shows the seller you can actually afford to buy their home and if you happen to make an offer the deal is less likely to fall through due to financing issues.
Get Comfortable with a Creditor. This sounds silly but a home is possibly the biggest purchase you will ever make and you want to be comfortable with the mortgage lender since they will be asking many personal financial questions like:
- Job/career status
- Monthly debt payments
- Total Assets and debts
The pre-qualifying process gives you the opportunity to meet with a couple of lenders or mortgage brokers and find one that you enjoy working with. You should ‘shop’ for a lender who answers your questions in a way that you understand, who will take the time to listen and one who will give you many loan options. There are several types of loan options out there, and together, you can find the one that will work best for you! (Click Here to Find Out More Basic Loan Products)
Fast, Easy and Free. Whether it’s your first or fortieth time, getting pre-qualified for a mortgage is the initial step in the home buying process. The great news is that a pre-qualification is fairly simple, doesn’t involve a commitment between you and the lender and there should be no a cost involved. (Click Here to find out the difference between a Pre-Qualification and a Pre-Approval.) You will need:
- Last month’s pay stub or other proof of employment.
- Tax documents from the previous two years.
- Two months of bank statements.
- Credit reports from all 3 bureaus (the lender can usually retrieve this for you).
Not many of us buy homes with cash, so getting a pre-qualification is a very important initial step for anyone who wants to finance a new home. For personalized advice, talk to your Hometown Real Estate Professionals about your home dreams and where to begin! 301-689-0100.