Mortgage prequalification -- not to be confused with mortgage preapproval -- is the first step most people take when purchasing a home. While preapproval offers buyers a guaranteed loan amount, prequalification provides them with a rough idea of what they might be able to borrow. Prequalification is helpful for determining whether you're truly ready to buy a home. The prequalification process is straight-forward and fairly simple, but the difficulty level of qualifying will depend on your financial history and current finances.
Build or repair your credit by making all of your payments on time and in full. Take care of any outstanding charges or garnishments and pay down your debt as much as possible. Pull a copy of your credit report to make sure all of the information it contains is accurate, and if you find any errors, dispute them with the agency that reported them immediately.
Find established mortgage lenders online or ask friends and family for recommendations. Research and compile a list of a few lenders that offer low interest rates and make plans to prequalify through each. Prequalification is a no-strings-attached process, so you can prequalify with several lenders and compare what each is willing to offer you before you commit to borrow from one.
Meet with a loan officer or prequalify online. Most lenders don't charge for this service. During prequalification, you'll offer information on your income, assets and liability. The lender will review the information and determine whether you qualify to borrow from it, and if you do, the lender will provide you with a rough estimate of how much money it might lend you. During mortgage prequalification, lenders don't typically verify the information you provide.
Assess your results and consider getting preapproved. Take the figure offered by the lender and determine whether you are ready to borrow that much money -- or if you want to wait it out until you qualify for a higher amount.
- Continue building your credit and improving your financial status if you'd like to qualify for a higher loan amount. If you're comfortable with the amount offered, consider moving on to the next step and getting preapproved for a mortgage. A lender will verify the same information provided during prequalification and offer you an exact amount they are willing to lend you. The amount may not be exactly the same as the lender estimated during prequalification, but if the information you provided was accurate, the amount should be close.
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