Finding and touring your dream home can be exhilarating – then comes the loan process. If you’re not prepared, you might find that you can’t afford a mortgage for the house. Luckily, there is a way to prevent yourself from falling in love with a home outside of your price range. Keep scrolling to learn how to get a prequalification for a mortgage and save yourself time and heartache.
What Is Prequalification?
Prequalification is a letter from a lender that states that the lender agrees to provide you (the homebuyer) a mortgage under certain conditions. It is not a guaranteed loan offer, but it does tell you how much you can expect the lender to offer. Acquiring prequalification will help you set realistic goals as you begin the home-hunting process and will provide you with some negotiating ability if you are a cash buyer. A prequalification letter will also allow you to make an offer on a home quickly, which may prevent your dream home from slipping through your fingers.
It is important to note that prequalification is different from pre-approval. Prequalification is the first step in the mortgage process, and it is typically available at no charge. Because it is a relatively quick procedure and not a deep analysis into your financial situation, it does not carry the same weight as pre-approval. To be pre-approved, you must complete an official mortgage application and supply the lender with more documentation so that they can perform a more extensive check on your financial background and creditworthiness. You will receive a specific loan amount for which you are approved, and you may be able to lock in an interest rate.
Depending on your situation, you may wish to be prequalified, pre-approved, or both in the course of the mortgage process.
How to Get a Prequalification for a Mortgage
Home loan experts highly recommend prequalification to ensure that the home-buying process goes smoothly. Plus, it’s a very simple procedure. If you’re wondering how to get prequalification for a mortgage, follow these steps:
Check Your Credit Score
Solid credit will score you points with potential lenders. Although you don’t need to have excellent credit to buy a house, it will certainly come in handy when you’re wondering how to get a prequalification for a mortgage. Hopefully you’ve been spending the past few years building your credit. Whether or not you’ve planned ahead, there are some ways to enhance your credit score before talking to a lender:
- Sign up for autopay on all your bills to make sure you never miss a payment.
- Avoid unnecessary hard hits on your credit report. When you apply for a credit card, bank loan, car loan, or mortgage, the lender will view your credit score, which is considered a hard inquiry, or “hard hit.” Hard hits can affect your credit score for two years.
- Avoid closing long-standing accounts, as this will shorten the length of your credit history.
Gather Your Paperwork
In order to show your future lender that you have sufficient means to make a down payment and mortgage payments, you’ll need to provide certain documents. If your important papers are in the abyss of your attic, set aside enough time to locate them.
Round up all of your personal financial information, including pay stubs, tax returns, and W-2s from the last two years. If you have any documents that show additional sources of income like overtime, commissions, bonuses, interest and dividend income, Social Security payments, VA and retirement benefits, alimony, or child support, find those as well. Your loan officer will typically ask to see the following items:
- Federal tax returns from the most recent two years
- W2s and 1099s from the most recent two years
- Most recent paycheck stubs
- Government-issued photo ID
- Social Security Awards Letters
- Retirement Awards Letter
- Child support or Alimony court order
- Bank statements (all accounts, all pages) for the most recent two months
Apply for Prequalification
When you’re ready to apply, call the lending company or apply online (whichever you prefer), and you will be guided through the simple process. When the lending company receives your application, a loan officer will call you to review the details and request documentation as needed. Using this information, he or she will discuss the best home financing options for your specific situation and goals.
You can complete the entire process from the comfort of your own home. Although prequalification can sometimes take between two weeks and a month, in most cases, you will be issued a prequalification in minutes.
Now that you’ve learned how to get a prequalification for a mortgage, are you ready to move forward? If so, contact PrimeLending today. Our team of home loan experts focuses on making every step of the home-buying process simple, transparent, and rewarding. With our expertise and commitment to clear and timely communication, we can guide you through the mortgage process from application to closing. To get started, please call 417-616-0777 or contact us online. We look forward to hearing from you!