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Pre-qualifying: Understanding the Process and the Benefits Related to Purchasing Real Estate
Katrina asked:
Any person interested in purchasing real estate properties need to be pre-qualified for a loan. Doing this puts a buyer in good position especially in deciding what to buy and how much to buy. However, do you know what getting pre-qualified means? Do you already know the benefits of getting pre-qualified?
Pre-qualifying: the meaning
Pre-qualifying is the process whereby a lender makes an initial analysis of whether or not the borrower is qualified for a loan. In this stage of mortgage application, lenders draw a rough estimate of the amount that could be possibly granted to the borrower. These are then based on few information that will be provided by the borrower. After such, they will send a notice through a letter, in order to affirm the borrower that they are qualified to loan a specific amount.
Certain calculations may be done to draw the estimates. They do this by identifying qualifying ratios. These ratios will give the lender a rough picture of the relationship of the borrower’s income to his or her debt. This, along with the compensating factors, will also help the lender in identifying the financing options to suggest.
As mentioned above, borrowers will be asked to furnish data for their analysis. This is the basis for calculating qualifying ratios. The data is also used to identify compensating factors that could counterbalance any deficiencies of the borrower. Below are the data that might be required for pre-qualifying:
Monthly expenses including your annual tax Income from all sources Basic information like name, address, occupation Assets owned and current debts Credit report History of previous residences and employment
Getting into the process
Know that getting yourself pre-qualified will not cost you a dime. You can just go to a trusted lender and give them the data requested. Some will also consider over the phone pre-qualifications (if the lending institution permits it). Another option is to go online. Some websites provide prequalification calculators that will generate an analysis that could be similar to that of the lender. However, these services are not accurate. Hence, it is still best to consult experts in person.
Benefits of getting pre-qualified
Although this process does not guarantee you in getting the actual loan, being pre-qualified can give you an idea on what homes you can purchase. Aside from that, it can also give you a picture on what your monthly expenditure will be if you avail of the loan. This will get give you time to think of ways on how to manage your finances efficiently.
Other points to consider
If you want to prove that you are a serious buyer, getting pre-approval is sometimes better. In pre-approval, you get a more accurate estimation of the loan; thus, there will be no doubts in picking out the house that you want. In addition, doing this would also expedite your loan processing thereafter.
Pre-qualification is just the first step in getting a mortgage. Therefore, it should not be misconstrued as the actual loan itself. Remember, the values are estimates only. It can even change when the lender goes through an extensive credit check (like in pre-approvals). In case, you have provided a falsified or an altered information, the amount of loan could change; or worse your application can be denied.
La Mirada Real Estate
Any person interested in purchasing real estate properties need to be pre-qualified for a loan. Doing this puts a buyer in good position especially in deciding what to buy and how much to buy. However, do you know what getting pre-qualified means? Do you already know the benefits of getting pre-qualified?
Pre-qualifying: the meaning
Pre-qualifying is the process whereby a lender makes an initial analysis of whether or not the borrower is qualified for a loan. In this stage of mortgage application, lenders draw a rough estimate of the amount that could be possibly granted to the borrower. These are then based on few information that will be provided by the borrower. After such, they will send a notice through a letter, in order to affirm the borrower that they are qualified to loan a specific amount.
Certain calculations may be done to draw the estimates. They do this by identifying qualifying ratios. These ratios will give the lender a rough picture of the relationship of the borrower’s income to his or her debt. This, along with the compensating factors, will also help the lender in identifying the financing options to suggest.
As mentioned above, borrowers will be asked to furnish data for their analysis. This is the basis for calculating qualifying ratios. The data is also used to identify compensating factors that could counterbalance any deficiencies of the borrower. Below are the data that might be required for pre-qualifying:
Monthly expenses including your annual tax Income from all sources Basic information like name, address, occupation Assets owned and current debts Credit report History of previous residences and employment
Getting into the process
Know that getting yourself pre-qualified will not cost you a dime. You can just go to a trusted lender and give them the data requested. Some will also consider over the phone pre-qualifications (if the lending institution permits it). Another option is to go online. Some websites provide prequalification calculators that will generate an analysis that could be similar to that of the lender. However, these services are not accurate. Hence, it is still best to consult experts in person.
Benefits of getting pre-qualified
Although this process does not guarantee you in getting the actual loan, being pre-qualified can give you an idea on what homes you can purchase. Aside from that, it can also give you a picture on what your monthly expenditure will be if you avail of the loan. This will get give you time to think of ways on how to manage your finances efficiently.
Other points to consider
If you want to prove that you are a serious buyer, getting pre-approval is sometimes better. In pre-approval, you get a more accurate estimation of the loan; thus, there will be no doubts in picking out the house that you want. In addition, doing this would also expedite your loan processing thereafter.
Pre-qualification is just the first step in getting a mortgage. Therefore, it should not be misconstrued as the actual loan itself. Remember, the values are estimates only. It can even change when the lender goes through an extensive credit check (like in pre-approvals). In case, you have provided a falsified or an altered information, the amount of loan could change; or worse your application can be denied.
La Mirada Real Estate