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Benefits of Prequalifying for a Mortgage

homes you can afford

Mortgage lenders and real estate professionals frequently promote prequalifying for a mortgage as the best route for prospective homeowner. Prequalifying establishes how much you can borrow and the price range of homes you can afford to buy.

Prequalification Can Streamline Purchasing Process
Mortgage lenders can prequalify you for a home loan before you start looking at homes.  Lenders can help determine what type of home loan best suits your situation and describe the features and benefits associated with various mortgage options. You can use free affordability calculator tools to get an idea of how much you can afford, but having a lender formally prequalify you for a mortgage loan can give you a "leg up" in the home buying process.

Establishing Affordability: By prequalifying for a mortgage before you start shopping for your new home, you can focus your efforts on houses that you can genuinely afford to buy. You can use free affordability calculator tools online. Being prequalified or preapproved for a mortgage loan can provide leverage with sellers.

Motivating Sellers: Sellers entertaining multiple offers may pay more attention to offers submitted by prequalified buyers. The sellers know that these buyers have taken the time to shop for mortgage financing and that the sale may close faster.

Saving time (and maybe money): Once you're prequalified, you know which homes you can afford and won’t waste time viewing homes that are out of your price range. Prequalified buyers can make an offer with reasonable certainty that they can get the mortgage financing they need. The lender has already done some of the preliminary work; this can help prevent last minute delays due to mortgage approval issues.

Planning for extra costs: If you're buying your first home it can be easy to overlook additional costs of homeownership. By prequalifying for your mortgage, you'll have an idea of what your mortgage payments will be and can plan for home maintenance and repairs, lawn care, and additional utility costs.  The amount you prequalify for is the maximum mortgage amount you can borrow; by considering homes requiring a lower mortgage, you can budget to allow for extra costs associated with owning a home.

Improve Your Negotiating Power: You may need to make a counter offer when buying a home. Sellers may be more flexible when considering terms of your offer or counter offer as a prequalified buyer.

Streamline the closing process: Prequalified buyers have established a relationship with a mortgage lender and know what to expect in terms of qualifying for a mortgage. Although prequalifying doesn't eliminate the possibility of delays before closing, it can reduce the possibility of "surprises" involving your ability to get the mortgage you need

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Posted By :
Karen Lawson is a freelance writer with extensive background in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.


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