What is a Mortgage Pre-Qualification?
A mortgage pre-qualification is a letter from a bank or lender that offers an estimate of how much you may be able to borrow for a loan. It’s the first step that people take once they start thinking seriously about buying a home - and for good reason. Not only does it give you an idea of how much you can spend, but having one in hand lets agents and sellers know that you’re serious about making a purchase.
When you’ve started thinking seriously about buying a home, give us a call. All you need to do is answer a few, short questions about your income, debts, and assets and we’ll be able to pre-qualify you. Plus, even if the loan amount you’re given isn’t quite where you want it to be, we’ll work with you to help you get your finances in home-buying shape.
It’s important to note that a pre-qualification is NOT the same as a guarantee. Since the figure we’ll give you is based on a broad picture of your finances, rather than verified documentation, that number may change later on. However, it will give you more than enough information to get started.
Benefits of Pre-Qualifying:
Buyers use mortgage pre-qualifications for a variety of reasons, including:
- To get an idea of how much house they can afford
- To learn if there are any issues hurting their current ability to get financing
- To start getting themselves in the best financial shape possible before it’s time to apply for a loan
- To give themselves credibility with agents and sellers
Pre-Qualifying and Credit:
Many buyers worry about how pre-qualifying will affect their credit score or if they’ll be able to pre-qualify at all thanks to a non-traditional credit history. Fortunately, more often than not, their worries are unfounded. To put your mind at ease, here are some answers to some of our most-asked credit questions:
“Will pre-qualifying affect my credit score?”
Short answer: no. Pre-qualifications are soft inquiries, which means they have no bearing on your score. Additionally, since the Dodd-Frank Consumer Protection Act passed in 2010, all real-estate-related inquiries count as one, as long as they’re made within the same 30-day period. This means, that even if you decide to pre-qualify with a few different lenders in order to get a second opinion, your score will be fine.
“Should I pre-qualify with bad credit?”
Many buyers are afraid that pre-qualifying will further damage their not-so-great credit. However, in the long run, it’s better to do so sooner rather than later. Once you’ve gone through the pre-qualification process, we will know exactly what needs to be done to bring your credit score up to where it needs to be. The more time you give yourself to work on improving your score, the better shape you’ll be in once you’re ready to hit the market.
"What if I don’t have a credit history?”
Getting pre-approved with a non-traditional financial history may take a little more work, but it’s far from impossible. In these cases, it’s all about finding a loan program that allows you to use alternative sources of financial documentation outside of a credit score or savings account.
Since our team is part of Armed Forces Bank, we have access to a wide variety of programs such as CHFA and the Turnkey Assist program, to name just two. Give us a call and we’ll assist you in finding the program that best suits your needs.
“What if I don’t have money for a down payment?”
Fortunately, these days, buyers have plenty of options at their disposal to help lessen the stress of making a big down payment. Military personnel - both active-duty and retired - are able to apply for VA loans, which allow for a 0% down payment.
For those without a military background there are payment assistance grants available through CHFA and Turnkey Assist. These grants give qualified buyers up to 4% of the home’s purchase price to put towards a down payment.
Whichever category you fall into, we’re happy to help you in reviewing your options.
How much can I pre-qualify for?
Again, the loan amount that you qualify for will depend largely on your individual income, debts, and assets. Fortunately, however, getting an answer is super simple. All you need to do is answer a few questions.
Use our mortgage pre-qualification form to get started.
Pre-Qualification vs. Pre-Approval
Pre-approvals are essentially a more legitimate version of a pre-qualification. In this case, we’ll take the time to verify your financial information in order to definitively state that we’re able to approve you for a loan.
Most people go through the pre-approval process once they are ready to start submitting offers. Most sellers prefer a pre-approval over a pre-qualification because they see it as additional reassurance that the buyer is serious about purchasing the home.
Documentation Needed for a Pre-Approval
Ready to get a pre-approval? Here’s what you need:
- 30 days of paystubs (with your year-to-date income included)
- Two years of tax returns
- Two years of W-2’s
- Quarterly statements for all of your assets - checkings accounts, savings accounts, 401K’s, investments, etc.
- Your social security number and driver’s license or state ID
No matter where your financial situation may be, we’re here to help. Get started on your path to becoming a homeowner by applying for a pre-approval today.