The 2nd Step in the Home Buying Process (after choosing a Realtor)
Getting Pre-approved for a Mortgage
Determining how much money you have available for a down payment and closing costs and deciding on the total monthly mortgage payment that best fits your budget affects almost every aspect of buying a home.
Most lenders can pre-qualify you for a mortgage over the phone based on questions about your income, debt, assets, and credit history. Lenders can then estimate how much mortgage you qualify for.
Pre-approval vs. Pre-qualification
Being pre-qualified and pre-approved are two different things. Pre-approval means that you have applied for a mortgage, filled out an application, had your credit score pulled, and your employment, assets, etc... verified. When you are pre-approved, you know exactly what the maximum loan amount will be.
A pre-qualified letter is not verified and therefore does not impress if you are competing with other buyers who are pre-approved. When you are pre-approved, you know exactly how much house you can afford. It gives you credibility as a serious buyer, letting the seller know up front that you will qualify for a loan to buy their property.
Choosing a Lender and Shopping Rates
It’s important to choose a legitimate lender. Legitimate lenders include: mortgage bankers, credit unions, banks, savings and loan associations, online lenders, and mortgage brokers. Avoid lenders who misplace forms or files, collect information in an unorganized manner, are not knowledgeable about interest rates, points or closing costs and those who cannot provide you with accurate information.
Some loan programs charge a slightly higher interest rate for minimal down payments. Interest rates for different loan programs are not the same. For example, conventional, VA, and FHA all offer fixed rate loans. However, the rates vary from one program to another. The loan officer will be able to tell you which programs fit your needs and quote your rates accordingly. However, if you are shopping on the Internet, you may have to develop some idea of your loan program on your own.