Buying a home is one of the most significant financial decisions you will make in your life. Each step in the process is important to ensure a smooth transaction. Over the next several weeks, we will explore each step of the home buying process in detail. Experienced NFM Lending Mortgage Loan Originators will share advice and insight about each step, so you can be prepared when the time comes to buy a new home. In this blog, we will discuss the first step in the buying process: getting pre-qualified.
What is pre-qualification?
A pre-qualification is when a lender evaluates a loan applicant’s eligibility for a home loan. The Loan Originator collects information and documentation from the loan applicant, such as their employer information, gross income, asset information, and current expenses. The lender then gives the applicant an idea of whether they could qualify for a home loan, and the approximate amount of the loan they could qualify for.
Why get pre-qualified?
Pre-qualification allows you to enter the home buying process prepared. It makes your home search more efficient, and ensures that when it comes time to make an offer on a home, you are ready.
“It is important to get pre-qualified so that you will know what you can afford, what you will qualify for, and what types of homes you should be looking at,” says Bruce Dorsey, Mortgage Loan Originator with NFM Lending. “You want to know how much your payments will be, and have confidence that when you find your perfect house you can make an offer on the house and qualify for the loan. If you are not pre-qualified first, then when you do find your perfect house, you can make a credible offer on the house. Without this, you run the risk of losing the home you want because other potential buyers that are already pre-qualified may be making offers on the home.”
In addition to being prepared and helping you know your price range, getting pre-qualified will make it easier for you to hire a real estate agent. Real estate agents typically prefer to work with pre-qualified buyers, in order for them to be able to show you houses in your price range, and so they know you are prepared to make a credible offer on a home when the time comes.
Helpful tips for getting pre-qualified
You may be considering a home purchase later this year, or at some point in the near future. Below are some tips from Bruce Dorsey on preparing for the pre-qualification and home buying processes.
- Keep all rental payment receipts, and make payments via check or money order so that there will be a record of your rental payments (don’t pay with cash).
- Don’t make any major purchases before or during the purchase process (auto loans, furniture, etc.) Wait until after you have purchased your home.
- Continue to save money for unexpected expenses during the purchase process.
It is important to be as prepared as possible when you start the home buying process. Once you are pre-qualified, the next step is to choose your loan type. Stay tuned for our next blog on how to choose the loan type that is right for you.
*Please note that the pre-qualification does not constitute a commitment or a loan approval, but is instead a preliminary assessment of your current credit worthiness.