Getting Prequalified for a Mortgage
Before you begin house-hunting and sorting through your buying options, you should first get prequalified for a mortgage. A mortgage prequalification will put you in a better position to determine your budget and will show sellers that you’re a serious buyer with the means to make the purchase.
Here is an easy-to-follow breakdown of what it means to get prequalified and why it’s especially important to have when buying a home in San Diego’s competitive real estate market.
What is mortgage prequalification?
A mortgage prequalification is exactly as it sounds — it’s the process of estimating how much money you mightqualify for borrowing from a lender. It’s not a guarantee of anything from the mortgage lender, it’s simply an estimation tool to help you get started in your home search.
Prequalification is an expedited process that doesn’t require much information from you and is usually free. Typically the lender will give you a response right away after doing a brief check of your provided financial information and will give you an idea of the range for setting your budget.
Prequalification vs preapproval
Prequalification and preapproval are seemingly similar, but they are entirely different procedures. While prequalifications give you an approximation for the amount that you can borrow, preapprovals will show you the actualamount that you can borrow.
To obtain a preapproval, you’ll need to provide in-depth documentation whereas the prequalification is much quicker. If you’re undecided about buying a home or are still choosing between renting and buying, a prequalification is what you need because at this point in time you just need to figure out a realistic budget.
On the other hand, if you’re certain that you’re ready to buy a home and want to get the process moving quickly, a preapproval might be better. It usually costs money to go through the preapproval process and requires additional time and document-gathering so it’s not something you should do on a whim. Alternatively, the prequal process is fast, free, and will help you at the beginning of your home search.
Benefits of getting pre-qualified
There is really no downside to getting a mortgage prequalification. One of the major benefits it provides is that it gives you and your realtor a starting point for the home buying conversation. Without having a realistic estimate about what you can afford to borrow, you won’t know where to set your sights and you might even be pleasantly surprised about what options you have.
Another important benefit is that mortgage prequals give you some additional credibility as a home buyer. It shows home sellers that you are not just browsing to take up their time but that you’re serious and have put in the effort to check your mortgage options by working with a lender.
It’s important to also note that a mortgage prequal isn’t a binding agreement; it’s only an estimate for what you’d likely be able to get approved for, and you’ll need to go through the full approval process before making the purchase. Think about the prequalification as a “big picture” idea for your mortgage.
How to get prequalified
The first thing to do when getting prequalified for a mortgage is to do your research and find a licensed lender that you trust. Since buying a home is a high-stakes purchase, it doesn’t hurt to meet with multiple lenders early on. Once you pick a lender or two, you’re ready to begin the prequal process.
A mortgage prequalification doesn’t require extensive documentation and usually just depends on self-reported responses. Expect to be asked to provide ballpark answers to multiple questions about your income, savings, and taxes. Some lenders will also run a credit check to give a more accurate estimate. And that’s basically it, a prequalification is as simple as that!
When to get prequalified
The best time to get prequalified for a mortgage is before you even start looking at properties. The sooner you get started on this, the better because you wouldn’t want to have your heart set on any particular home before knowing for certain that you would be able to afford it. If you’re at all considering buying a home in the near future, then it’s a good idea to start with the prequal before you begin reviewing your budget so you can start planning.
Your realtor will be able to show you properties that fit well within your budget if you have been prequalified, and it puts you in a strategic position as a buyer. The lender will typically give you a letter proving your prequalification which you can then share with your agent as well as the seller.
Remember that a prequal doesn’t prove you will certainly qualify for that amount of money, so you’ll want to move forward with a preapproval once you are ready to take the next step. This is a conversation that you should have with your realtor, and they will walk you through this process.
Contact San Diego Realtor Nick Rogers today if you’re thinking about buying a home in San Diego — he’ll help you with every step of the way from prequalifying for a mortgage to handing you over the keys.