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When searching for the perfect home, you will see lenders and online resources mentioning pre-qualification. You may understand the basics, but knowing what it means in practice and how to go about it is another challenge entirely. Thankfully, you’re in good hands with BrickWood Mortgage.
Before we talk about mortgage pre-qualification, we should first say that it’s never too early to talk to a mortgage broker about your situation. In fact, contacting reliable professionals early can help prevent common mistakes. Rather than falling into the same traps as others, don’t be afraid to reach out to our team at (843) 314-4101.
What Does It Mean to Pre-Qualify Your Mortgage Loan?
Essentially, this is where you qualify with a lender to calculate how much you can borrow when attempting to purchase a home. After providing details about your life and finances, you get an estimation of not only what you can borrow but the expected rates. While it doesn’t guarantee a mortgage, it does give you a better idea of what you can afford and it can also give you more confidence when searching the market for a property.
At this stage, you should be working with a loan originator (or LO) with an NMLS# – This is a mortgage professional that works for a licensed organization that assists prospective borrowers to get the right mortgage. It’s important to reiterate that a pre-qualification doesn’t guarantee that you will get the loan when purchasing a property, as pre-qualifications are based on stated figures and have not been underwritten.
What if you’ve experienced a major life event, a change in financial situation, or if substantial time has passed since your initial pre-qualification? In this case, it’s best to contact your LO to request an updated pre-qualification.
How Do You Pre-Qualify for a Mortgage?
Generally, the first step to getting a mortgage pre-qualification is to contact a lender. However, we highly recommend contacting a mortgage broker because they will have access to a multitude of lenders. Rather than working with one lender, you can access a wider market and benefit from better terms and rates.
If you’re working with a broker, they will ask for all the pertinent information to get you through the initial pre-qualification process. For example, this is likely to include some questions about your assets, income, and debts. To provide a pre-qualification, lenders need to know about your financial history and your reliability as a borrower. Since the financial information is self-reported, the lenders won’t need to do much in terms of verification.
During this process, lenders should discuss your intentions for the property and run a credit check. Also, they will collect income, asset, and debt information to calculate both debt-to-income (DTI) and loan-to-value (LTV) ratios. By analyzing all this information, they can ascertain your creditworthiness.
Pro Tip – If you want the home-buying process to go smoothly, it’s always best to be honest and forthcoming from the beginning. The more honest you are when providing information, the less likely you are to experience problems later in the process. If you were to provide false information during the initial application or misrepresent numbers, this will be discovered when the lender is verifying your application in underwriting, and it could be the difference between getting the property of your dreams and missing out on a mortgage. Ultimately, all lenders are different. With accurate information, the broker will ensure that all mortgage programs offered are suited to your specific situation.
After the broker has received all the information they need, they will calculate what you’re likely to afford. With advanced knowledge of the market (we recommend working with an experienced real estate agent), you can pre-qualify for a mortgage and know what you can afford in terms of house prices.
Once you have been successfully pre-qualified, your LO will then provide a maximum purchase price. What’s more, they should also be able to provide your credit score, that day’s interest rate(s), the estimated monthly payment, and estimated amount needed to close.
When you go through the purchasing process, the broker will work with the lender you select through the application, underwriting, and closing stages while doing everything possible to ensure you close on time with the expected interest rate and costs. During the underwriting process, you will need to provide documentation to verify the information stated during the application phase. For example, this could be bank statements to verify stated assets or pay stubs to verify stated income. The lender’s underwriters must verify that you qualify for the mortgage for which you’ve applied in terms of both income and credit.
This is a process that allows prospective buyers to learn what sort of mortgage they could qualify for – while it doesn’t guarantee a mortgage when it’s time to apply properly, it’s the first step toward securing one. Borrowers can contact lenders or banks directly, but working with a broker provides access to more lenders and more opportunities (as well as expertise and experience!). Most borrowers can get a better deal by using a mortgage broker compared to going to a lender or bank directly.
Because it tells sellers and agents that you have taken the first step and can afford the property in which you’re showing an interest. In other words, you’re not going to waste their time because early indications have suggested that you can obtain a mortgage sufficient to purchase the property.
Normally, a pre-qualification letter doesn’t expire (assuming your financial situation doesn’t change significantly). However, mortgage pre-approval is slightly different. Lasting up to 90 days, they are more comprehensive and will require more time.
Contact BrickWood Mortgage Today
With this, you should have a better idea of pre-approved loans, how to pre-qualify for a mortgage, and more. To get professional assistance, contact BrickWood Mortgage today. Why contact one lender when you can work with a broker and access several? This includes the most popular lenders. Call us today at (843) 314-4101.
What Our Customers Are Saying
Paul Hankins at Brickwood Mortgage is a reminder of what a professional, knowledgeable, and trustworthy businessman looks like. After six frustrating weeks with another mortgage
Timmy Nash was excellent to work with. He answered every question and walked us through the process. I would recommend Brickwood to anyone who is
Laurie Bentley Manderbach
I have bought and sold a lot of homes over the past 25 years and therefore have worked with a lot of loan officers and