How and When To Get Prequalified for a Mortgage

When Should You Get Prequalified?

You should get prequalification early in your home buying journey shortly before you begin to look for homes.

There is an expiration date for prequalification, usually 60 to 90 days, so you don’t want to act too soon. However, the process can take a little time, so don’t do it the morning you’re going to look at houses. Taking action a few days to a few weeks before you begin shopping for a home usually makes sense.

Benefits of Getting Prequalified

There are some significant benefits to getting prequalified:

• Setting a realistic home budget. When your lender tells you how much you can likely borrow, you can make sure you only look at properties in your price range.
• Identifying financial roadblocks. If your lender denies you a loan or offers a loan for a lower amount than you need, it’s best to know that early. You can take action like adjust your budget, save more for a down payment, or improve your credit.
• Making you a stronger buyer. When you make an offer on a home, the seller may want to see that you have prequalification or preapproval to feel more confident you’ll get the financing needed to close on the deal.
• Exploring loan options: Getting prequalified allows you to understand the rates and terms a lender offers. You can compare loan costs and features with different lenders to find the right loan for you.

How to Get Prequalified for a Mortgage

Each lender may have slightly different requirements for prequalification. However, here are some of the steps you can expect to take.

1. Check Your Credit

Lenders review your credit score when determining if you can buy a home. Most lenders want you to have a credit score of around 620 or higher to qualify for a loan. However, some loans, such as FHA loans, allow you to borrow with a score as low as 500 if you can offer a 10% down payment. Credit score is important because it tells lenders if you’re likely to be a responsible borrower.

Lenders also consider your debt-to-income ratio (DTI) during the preapproval process. This is a comparison of your income and debts, including your new loan. A lower DTI means you are more likely to get approved for a loan with competitive terms and a low interest rate.

2. Gather the Necessary Documents

You will need some financial information during the prequalification process.

The more accurate the information you provide, the more likely it is you’ll ultimately be approved for the amount you prequalified for.

Gather financial documents like bank statements, pay stubs, and tax returns so you can provide the necessary information to your lender during the process.

3. Apply with a Lender

When you are ready, you can move forward with applying with a mortgage lender. You should look for a mortgage lender that offers the types of loans you’re interested in, such as FHA loans. conventional loans, or jumbo loans.

Many mortgage lenders allow you to apply online, while some connect you with a mortgage loan officer or other mortgage professional to help find the right loan for you. Getting professional advice can sometimes be helpful to learn about the different kinds of loans so you can decide which to apply for.

4. Get Your Prequalification Letter

Once you have provided your financial details, your lender will provide a prequalification letter. You can show it to sellers when you make an offer to provide proof you’ll likely be able to finance a home.

Freedom Mortgage offers tailored prequalification letters for strategic homeowners who want to support they can close without revealing their maximum negotiating cap. You can request that your prequalification letter shows the maximum loan limit of your choosing.

Mortgage Prequalification Process FAQs

If you still need to know more, here are the answers to some frequently asked questions about the mortgage prequalification process.

Is It Easy to Get Prequalified for a Mortgage?

The actual prequalification process is fairly simple and involves providing financial information to a lender. Whether you actually prequalify for a loan or not will vary depending on your credit score, income, current debt, and other financial credentials.

Is It Better to Be Prequalified or Preapproved?

Both prequalification and preapproval can make the home buying process easier, and the right approach depends on your situation. Prequalification can be faster and easier than preapproval while still providing a clearer picture of what you can borrow, especially if you provide accurate and comprehensive financial information to your lender.

Final Thoughts: Are You Ready to Get Prequalified?

Getting prequalified for a home loan is one of the first steps to take during the home buying process as it will help you to understand how much you can borrow and what your loan will look like. Reach out to Freedom Mortgage today to get prequalified and get started on your home buying journey.