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Prequalifying for a Mortgage:
3 Reasons to Get Prequalified

Last Updated

June 18, 2024

Written By

Brigid Flynn

The journey to homeownership can be equally exciting and daunting. One of the most helpful steps we recommend to new homeowners to make this process easier on yourself is getting a mortgage prequalification. Prequalification is a powerful tool that not only narrows down your search but can clarify your financial standing prior to house hunting while also giving you a competitive edge in an overcrowded market. By embracing the prequalification process, you can make your homebuying experience smoother, quicker, and way more enjoyable.

What is a mortgage prequalification?

Mortgage prequalification is an initial evaluation by a mortgage lender that determines how much money you may be eligible to borrow. It is based on a simple snapshot of your financial situation. Once all aspects of your finances have been considered, your mortgage lender then provides you with a loan estimate that you could receive, which you then take with you as you begin house hunting to show buyers that you’re serious about purchasing.

So, why else should you consider getting prequalified? Check out 3 key benefits of getting a mortgage prequalification below!

  1. Overviewing your finances

Before you consider buying a home, it’s crucial to determine if you can afford one in the first place, and if so, how much. This process involves reviewing your income, debts, and monthly expenses. All existing debts should be considered, including student loans, car payments, and credit card balances.

Having a co-signer can boost your mortgage application by considering the gross household income, potentially qualifying you for a larger loan. Non-traditional income sources like child support, alimony, and investment income can also be included in your income calculations, if documented properly.

This financial overview process gives your lender valuable insight that helps them identify what mortgage products may be most suitable for you based on your unique financial situation and goals, as well as what programs and grants you may be eligible for that can help cover down payments and closing costs. They can also help you plan ahead for other additional costs such as taxes and homeowners insurance.

  1. A more realistic search

The best time to get prequalified is before you start house hunting.  Having a preliminary framework for your budget gives you a clear idea of what you can afford before looking at your options. Having this budget ensured allows you to act quickly when you find the right property.

Furthermore, targeted home searching prevents wasting time on homes outside your budget, allowing you to focus your efforts on properties you can afford. It also prevents falling in love with a home and setting your expectations high, only to find out you can’t afford it.

  1. Competitive Advantage

Having a prequalification shows sellers and real estate agents that you are serious buyer who is ready to purchase a home, giving you an edge over other buyers. In this highly competitive market, having a prequalification can make your offer more attractive to a seller compared to those without one.

Prequalification tells sellers that a bank has already verified your financial information so there should be no problems finalizing a mortgage, making them more likely to accept your offer. This can be especially helpful If you’re self-employed or have a non-traditional income source, as prequalification can strengthen your offer by proving financial stability.

Getting prequalified for a mortgage streamlines the homebuying process, saves you valuable time, and strengthens your position in a competitive market. It provides you with a clear understanding of your financial position and points you in the right direction when looking for a home.

Take the first step towards your dream home by getting prequalified! Contact us today to schedule an appointment by visiting our mortgage contact page and fill out our digital contact form to get started.

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