To pre-qualify simply means to contact a lender (preferably a local lender) either in person, by phone or on-line to establish your ability to get a loan.
There are six very good reasons to pre-qualify – all 100% beneficial to you, the buyer.
1. This is how you find out how much of a loan you could be given so you know what home price range you should be looking at.
2. This is how you learn how much your loan payment will be at a variety of different loan amounts.
3. This is how you know which type of financing is most beneficial to you.
4. This is the way you ascertain how much cash you are going to need to proceed, i.e., down payment, closing costs, etc.
5. This tells you whether or not you need to ask for seller concessions (money from the seller to help with your closing costs) when you make your offer.
6. Once you are pre-qualified for a loan, your lender can provide you and your agent a letter of pre-qualification. Having that letter accompany any offer you write makes your offer stronger and more attractive to the seller.
Pre-qualifying is a win –win –win –win –win –win for you!
Pre-qualification checklist – Have this information before shopping for a home:
1. Can I now qualify for a home loan? If so:
a. How much can I borrow?
b. What is the payment at that amount?
c. What is the payment if I borrow less?
d. What type of financing is best for me?
e. How much cash will I need at closing?
f. Should I ask for seller concessions in my offer, (i.e., help with my closing costs) and if so, how much?
2. If I can not qualify for a loan right now:
a. What steps can I take to make it possible to qualify?
b. Approximately how long will it take for this to happen?