When you first start seriously contemplating a home purchase, you will quickly discover that the road to homeownership has a lot of steps along the way. If you want the best results, you’ll need to take the time to educate yourself and make thoughtful decisions at each of these many milestones. Prequalification will likely be one of the first steps you take as an aspiring homebuyer. Fortunately, learning how to get prequalified for a home loan is easy.
How to Get Prequalified for a Home Loan
As HerMoney explains, prequalification is one of the earliest steps in the home loan process. It’s a quick, nonbinding estimate of what a lender might loan you based on your self-reported financial information. Because no documentation is needed, you can simply reach out to a lender online, over the phone, or with a visit to their location to complete the prequalification process. It’s that easy, and you’ll normally have an answer quickly. Generally, you can expect a response within three days, but you may have an answer in just one day.
What Is the Value of Prequalification?
Why bother to learn how to get prequalified for a home loan? As NerdWallet reports, making an honest effort to provide accurate information during the prequalification process means that you get a fair idea of what you’ll be able to borrow when you actually apply for a mortgage. If you’ve been reviewing your finances and playing with online calculators, you may have a rough idea of what you can afford to spend on a home. Getting prequalified offers an expert opinion. If the numbers don’t match your expectations, you have a chance to find out why before you’re actively seeking a home loan.
Is Preapproval the Same Thing?
Prequalification and preapproval have a similar vibe, and you’ll hear the terms used in comparable situations, but they aren’t quite the same. While prequalification is a friendly estimate offered on the information that you provide, preapproval digs deeper and requires hard facts and real documentation. As Credit.com indicates, you should expect to provide your lender with specific information for a preapproval:
- Income Information: Be ready to show pay stubs, tax returns, and W-2s from the previous two years. Do you have additional income? Don’t forget to bring documentation of that as well.
- Asset Information: You’ll also want to have information about your assets on hand, including bank accounts, investments, and financial gifts from family or friends.
- Personal Information: Your lender will need a valid form of identification and your Social Security number so that they can run a credit check.
Which Should You Choose?
Should you get prequalified? Would going for preapproval be the better option? The answer depends on your situation and your goals. As The Truth About Mortgage explains, a prequalification is handy if you want a quick estimate of how much you will likely be able to borrow or if you want to do a trial run to check for hidden problems lurking in your finances before you apply for a home loan. However, a prequalification doesn’t really carry much weight because it’s based on estimates and undocumented data. That’s why real estate professionals and sellers often favor buyers who have been preapproved. After all, a preapproved buyer has done the work and demonstrated that they do have the means to get the loan needed to buy a home. Therefore, if you simply want a rough idea of your budget, or you’re still working to raise your credit score before trying to get a loan, prequalification is a great starting point. However, if you’re getting ready for some serious home shopping, then you might be better served by a preapproval. This is especially true if you’re in a competitive housing market. When sellers have their pick of offers, they may not even consider one from a buyer who hasn’t already been preapproved.
Are you ready to get prequalified for a home loan? Does preapproval sound more appealing? Are you still unsure which option is best for you? PrimeLending Dallas can help. Contact us today to get started.