Buying A Home: Pre-Qualifying For A Mortgage Loan
Buying a home is a large investment that will typically require you to take out a mortgage loan in order to finance your purchase. While there is no rule that says you have to pre-qualify for this loan before you begin the process of searching for your dream home, there are several benefits that come along with securing a pre-qualification letter from the lender of your choice.
For instance, sellers and real estate agents typically prefer to work with buyers who have obtained a pre-qualification letter because this letter demonstrates that they will be able to secure the financing they need to back up any offer that they put in on the home. The pre-qualification process can also help buyers to have a much better idea of exactly how much financing they will qualify for. This can help prospective buyers avoid putting in offers on homes that are out of their budget.
If you are planning to buy a home and wish to get pre-qualified for a mortgage loan, there are a few pieces of information that you will need to secure before approaching a lender.
One of the most significant factors that home mortgage lenders will consider when processing your pre-qualification is how much money you currently have available to put towards a down payment and closing costs. Most lenders will not pre-approve you for a mortgage loan if you are unable to demonstrate that you have enough money available to cover closing costs and an acceptable down payment. The amount of your required down payment will often be based at least in part on your current credit score. Therefore, you should also be prepared for the lender to pull your credit report as part of this process.
Proof Of Income
In order to pre-qualify you for a mortgage, a lender will first want to ensure that you have the financial ability to pay your monthly mortgage payment. In order to meet this requirement, the lender will often ask you to provide proof not only of how much your current income is, but also that you have maintained a steady income for the last two years.
While pre-qualifying for a mortgage loan can be extremely beneficial when going through the home buying process, it is important to note that this pre-qualification is not the same as a commitment to lend. In order to secure a final commitment from your lender, you will need to complete the full mortgage application process, which can only be completed once you have chosen the exact property that you wish to purchase.