Preparing for Mortgage Preapproval

Prequalifying for a mortgage loan empowers homebuyers. Once prequalified for mortgage financing, you can narrow the field of potential homes to those that you can afford. Sellers often prefer to deal with prequalified buyers, as it can help avoid delays caused by last minute mortgage application problems.

Before shopping for a mortgage and getting prequalified, using a free monthly payment calculator can provide some idea of how much you can afford to pay each month, and by extension, the price range you can afford for a home. Calculator tools are free, convenient, and easy to use, but it's important to know that mortgage payment calculator tools provide estimates only -- it takes a lender to get you properly preapproved.

Mortgage Preapproval: What are the Benefits

If you've started shopping for a home, you know that the process can be time consuming. Many homebuyers shop for months, find a home they want, and then wait for mortgage approval. By getting mortgage preapproval before shopping for a home, you can streamline the process of making an offer and waiting for mortgage approval. Real estate professionals and sellers appreciate prequalified buyers' potential ability to reduce the time between acceptance of a purchase offer and closing.

Prequalifying for a mortgage loan can also save time and eliminate illusions about affordability. Homebuyers, especially those buying their first home, may tend to make decisions with their hearts and may bite off more mortgage than they can digest. Shopping for a home that you can't afford can only lead to trouble, and typically ends in disappointment when you can't qualify for an affordable mortgage loan.Mortgage preapproval lets you know how much you can afford to spend for a home and mortgage payments. This prevents wasting time by considering homes that aren't affordable.

The Truth about Mortgage Payment Amounts

It's important to understand that payment estimates made by a mortgage payment calculator include only principle and interest (P&I). Unless you are able to make a down payment of 20% of the price of the home you're buying, your mortgage payment will include additional amounts for paying property taxes and hazard insurance. You'll also probably pay for mortgage insurance, required by most lenders on mortgage loans with less than a 20 percent down payment. These additional costs can add hundreds of dollars to your monthly payment. First time buyers also tend to overlook the additional costs of owning a home; it's necessary to save for home repairs and maintenance fees such as homeowners' association dues.

Being aware of these additional costs is helpful when dealing with mortgage lenders; they can direct you to affordable mortgage financing and can help you avoid budget shock after you've made an offer on a home.

Karen Lawson
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.