Three Things To Know About Mortgage Prequalification
If you’re looking to purchase a home, chances are you’ve given some thought to how much house you can afford, both in terms of purchase price and monthly mortgage payment. Since prospective buyers often fall into the trap of forgetting to consider extra costs – like property taxes and homeowners insurance – it can be worthwhile to invest time in getting a mortgage prequalification from a reputable lender.
A mortgage prequalification should not be confused with a loan preapproval, which is a more serious step indicating a commitment between you and a lender for a particular loan instrument and dollar amount. A prequalification is simply a professional analysis of how much you can afford to pay on a home monthly. Most lenders will use your financial history from the past two years to arrive at a calculation. Here are three more things to know about this useful tool:
- You’re not locked in to a lender. Prospective buyers are free to use one lender for a mortgage prequalification, then commit to an entirely different lender for an eventual home loan approval.
- Preparation is key. If you want an accurate prequalification analysis, you’ll need to provide the lender with the most accurate financial information possible. Consider bringing along a recent pay stub and the prior two years’ tax returns when you meet with your chosen lender.
- Different lenders may provide different analyses. This is a great reason to shop around before committing to a lender for prequalification. Choose one who seems to truly understand your current financial situation, as well as your home-buying needs, and who has at least five years of experience in the mortgage lending industry.
Mortgage prequalification represents an important first step in your search for the home of your dreams. Taking the time to know where you stand financially can help you narrow your search and more quickly arrive at the best home for your family.
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