Prequalification and Preapproval for a House Loan

One of the first steps in buying a home is to talk to a lender to see if you qualify for a loan. We recommend talking to lenders even before you think you are ready to purchase a home. This process will help you determine the loan amount for which you qualify. If you are unsure of your credit score, the lender or mortgage broker will most likely pull your credit report. If the score needs improvement or red flags come up, talk to your lender about how to possibly fix these issues. If you do not have a lender, The RED Team will be happy to give you a list of great lenders that we have worked with on recent transactions.

Once your credit score is determined, you are expected to give the lender several personal financial documents so they can prequalify you. After prequalification, the lender would check over your overall financial situation. This includes the debt, income, and assets of the borrower. The more in-depth analysis is called a preapproval. A preapproval verifies your financial information to get a more accurate figure for the loan you are seeking.

While a lender can give you a loan estimate, the client should remember that they should only borrow an amount they are comfortable with and what will fit into their personal budget. Just because a buyer is qualified to buy a more expensive home, doesn’t mean they should. Always remember that the monthly payment includes property taxes and insurance in addition to the monthly mortgage amount. The old saying of “you don’t want to be married to your home” is so true. Checking with a financial advisor is a great asset when making one of the largest purchases of your life. We are here to help you with each and every step!