How to Pre Qualify for a Home Loan

Pre-qualification estimates your maximum home loan amount.

Getting a pre-qualification for a home loan early in the home-buying process helps you determine the maximum price of your new house. This is a casual process whereby the mortgage lender looks at your finances and tells you how much you can expect to borrow. This free process takes only minutes or maybe a few hours. According to MSNBC, a mortgage pre-qualification may help you get a lower price on a property because the seller believes you can quickly obtain a mortgage and close the deal.

Instructions

1. Approach a mortgage lender or broker and tell him that you intend to take out a home loan soon. Ask for a quick pre-qualification to estimate your maximum loan amount.

2. Provide the mortgage lender or broker with your financial details. He is likely to ask about your annual income, credit score, asset worth and current debt levels. The mortgage lender or broker will then perform his calculations and come up with a figure for the maximum home loan amount you can expect to obtain.

3. Ask the mortgage lender or broker about the various home loan options you may qualify for and the pros and cons of each option. Request information about the amount of down payment you have to provide and the closing costs you may have to pay.

4. Approach other mortgage lenders or brokers to get their opinions. Mortgage lenders or brokers have varying standards and you may be able to pre-qualify for a larger loan at another mortgage lender or broker.

Tips & Warnings

• Closer to your purchase, approach a mortgage lender or broker for a mortgage pre-approval. You may have to pay a fee for the service, but you get the lender's written promise to give you a certain amount of money as a home loan if everything goes well. The pre-approval process takes longer, requires you to submit more documents and involves information verification by the lender.

• Getting a pre-qualification does not mean that the mortgage lender or broker will definitely give you a loan of the estimated maximum amount. The process does not involve information verification and the lender or broker makes no promises.

References

• "Bankrate.com"; Get Preapproved, Not Just Prequalified; December 2004
• MSNBC; Mortgages: What You Need to Know in 2009; Peter Coy; January 2009
• MSN Money; 8 Big Mortgage Mistakes and How to Avoid Them; Liz Pulliam Weston