Beginner Guide: How to Prequalify for a Home Loan
Do you fancy yourself a home owner?
One day you may consider moving out of a rental and into a home to call yours. You'll want to know what you can afford during this transition to save time. The best way to do this is to see how well you prequalify for a home loan.
The prequalification conveys that you're serious about the offer. It can give you an upper hand during the negotiations. It also grounds you in reality.
Want to increase your shot at home ownership? Read on to find out.
The Game Plan to Prequalify for a Home Loan
The process to prequalify for a home loan is simple and won't cost much.
Taking this action should not be confused with loan pre-approval. The prequalification step is NOT part of receiving a loan. Nor is it moving ahead with signing the dotted lines.
This is the time where you will talk with a mortgage professional. Or, you may use online resources to get an idea of what you can afford. It will account for your basic information such as income, debt, and assets.
The application does not (usually) pull your credit report.
Here is the game plan to prequalify for a home loan:
1. Gather Your Resources
The information you'll provide is basic. It's information you can pull through items like a credit report or tax documents.
Items to present would include:
- Loan amount
- Total income
- Income sources
- Credit limit
- Number of dependents
You will also want to provide information about the properties.
2. Know the Market
Successful negotiation happens when you are knowledgeable. Yet, it only works if you take time to understand items like:
- Mortgage rates
- Construction spending
- Inflation reports
Understanding these items will save you money. This happens as a result because you know what you're getting into.
3. Talk with a Professional
The chat may take place over the phone, in-person, or online.
A professional will assess your viability and "trustworthiness" with the information you provide. The data given must be accurate to receive a legitimate answer.
The entire process should take less than a few minutes.
4. Receive the Letter
At the end of this quick process, you'll receive a letter which states what you're able to afford. This document can become null depending on life circumstances (e.g. job loss). It's important to make a decision soon since things change.
The letter will also give you an understanding of where to improve if you do not meet personal goals. These areas tip off the actions to improve your credit score. The improvements result in a better prequalification on the next attempt.
Moving Forward with Moving In
The info you gain will help give you a greater, grounded understanding of the home that's right for you. It's the difference between buying a fixer upper or pursuing the idea of a new home.
The Washington State housing market is exciting and growing. The market currently has a 9% year-over-year rise in median sales price. Now's the time to jump from renter to owner.
Competition in this market is fierce. Learn from our home buying tips or connect with us. Let us help you navigate the process and find the home of your dreams.