Don\’t Fear The Loan Prequalification Process
If you\’re a seasoned homebuyer, you already know the importance of pre-qualifying for a loan before you start looking at properties. It seems like most sellers won\’t give you the time of day unless you can show proof you\’re a serious homebuyer. The reality is how much home you can qualify for depends on you.
There are many factors that influence the price of home you can qualify for. Can you net more income by adding a second job? Can you slash expenditures that aren\’t a priority? Had you decided what financing option you want to utilize? Are you a first time home buyer? Will the developer assist you with financing the deal? Is your family or friends willing to assist you will by lending money? Can a portion of the property be rented out for additional income? There can be a myriad of factors that influence your prequalification.
Your answers to these questions affect the amount of home you can afford. As you check property listings, try contacting a local Realtor or mortgage representative with expertise in complicated deals. Avoid relying on automated prequalifications or ones based on generic fill-in-the blank questionnaires. What kind of home you can qualify for depends greatly on the combination of bank and seller you\’re working with.
Prequalifying with the particular bank only gives a ballpark estimate of how much home you can afford when you use their financing. It can\’t reveal all the alternative financing options available to you. You can determine what your possibilities are only by spending time researching and negotiating all the available options.
The lender\’s prequalifications only reveals what you can afford to buy based on the financial information you given. The disadvantage of being prequalified is the mortgage lender is not bound to offer you a loan.
Only a pre-approval will show a banks\’ willingness to loan you the money. Most lenders will pre-approve you for a certain limit-even if you haven\’t started looking. One main advantage of having a pre-approval letter is real estate agents and sellers will take you more seriously because they\’ll know you can satisfy a loan contingency.
However, like a pre-qualification, there are several factors that can affect your borrowing limit such as the type of lender, mortgage programs, interest rates, and your credit history. Be aware a particular pre-approval only provides you with a limited snapshot of your borrowing capabilities. Also a pre-approval does not guarantee you\’ll actually get the loan. The lender must check out all of your information and verify you and the property fulfill other guidelines.
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