With mortgage restrictions tightening since the housing crisis, financing a residential property purchase can be a thorny issue. Most lenders will want a down payment of around 20%, a good credit score and established employment. Obtaining a mortgage credit pre-qualification means you have a loan commitment from a lender, based on an evaluation of your credit situation and your financial condition.
Getting a pre-qualification conveys a clear message; sellers will know that you are a serious buyer who means business. With a credit pre-qualification, you are able to establish a clear price range in which to work and show sellers that you are a qualified buyer.
While it may sound complicated, the procedure to apply for a home credit pre-qualification is identical to a typical mortgage loan application with one proviso. Since you have not yet found the property you wish to purchase, it won’t include information on the house you’ll end up buying.
All you pertinent information, your credit records, income history, assets, and debts are collected by a mortgage officer. This financial data is then sent through to an underwriting system and the underwriting process will conclude that you qualify for a loan. At this point you’ll obtain a loan commitment up to a specific amount, dependent on the property of your choice meeting certain standards.
There are four key benefits to getting your credit pre-qualified:
- You are going into your home search knowing from the very start what your price range is and you can then focus on the homes and neighborhoods that fit those parameters.
- If there are any problems or difficulties getting a mortgage, you’ll find out early in the process and can then take the necessary steps to correct them.
- Sellers and agents will know that you can back up any offer. There will be no question of whether you’ll be able to get a mortgage loan or not.
- With a large chunk of the mortgage loan process already taken care of up front, you can relax. When you eventually find the home of your dreams, the real estate transaction can be quickly completed.
Pre-qualification removes a lot of the stress from the process of buying a new home and allows you to fully explore your options. You can sit back and enjoy the hunting … House hunting, that is.