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Buying a Home? Learn About the Prequalification Process

The home-buying process can be confusing, especially if it’s your first time. Education on where to start can be helpful such as, learning about the prequalification and preappoval process. Here are some tips to set yourself up for success before you purchase.

Benefits of a Prequalification

Get started early with the loan prequalification process. It will help you better understand what you may be able borrow when purchasing a new home and set expectations as to what your monthly mortgage may be.

What You’ll Need To Get Prequalified

The first thing you’ll need to do is find a lender who can help you with the prequalification process, there are no costs or commitments associated to getting prequalified. Speaking to your realtor, friends or family members may be a great place to start for a recommendation.

The prequalification process begins with the lender asking questions about your  income, assets, current budget,  debts, and potential down payment to help estimate the amount you could borrow. While going through the process, it’s helpful to collect other important financial documents which will make the preapproval process go more smoothly. These documents can include, proof of employment, proof of income (w2, tax returns, and bank statements), investment, asset statements, and any other documents that show viable income.

Once you’re prequalified you’ll have a better idea of what investment you’re able to make on a new home. With it comes the confidence that you’re making the right financial decision for your future.

The Difference Between Loan Prequalification and Preapproval

As mentioned, there are no commitments between lender and buyer during prequalification for a loan, it’s a bit different when working with a lender for preapproval. It’s recommended that potential homebuyers find a lender who provides desktop underwriting approvals, which is the best form of qualification to purchase.  This process takes a little more time and work on behalf of both parties. Depending on the lender, there can be a small application fee. You’ll want to be sure that the lender you choose for preapproval is a reliable partner and someone you’d like to work with during the home buying process.

Once you’ve selected a lending partner and worked through your preapproval, be sure to ask your lender for a letter of commitment to help both you and your realtor understand your buying power when looking for a home. The bank will provide an approximate dollar amount that they’d be willing to loan for your home purchase. It’s important to remember that this dollar amount is contingent upon numerous factors including, appraisal, credit and financial verification, among other items.

If you’re looking for a trusted real estate professional with several reputable references in the area to help guide you through the preapproval process and ensure success when purchasing a new home, email or call Sarah Sitar, real estate professional. She specializes in the home buying process and can put you in contact with the right lender.