Going out and finding the ideal house you want can be very taxing and emotionally draining. This could be made worse if you find the house you want, and then discover that someone else can get their money faster, and you can’t buy it. Taking time to get prequalified for a mortgage can simplify house hunting and enable you to get into your new home much faster – and with fewer headaches.
Discover How Much Money You Can Get
When you get prequalified for a mortgage, a lender will place limits on the size of your mortgage. FoxBusiness.com says this lets you know right away the type and cost of the home you should look at, saving you time in house hunting. Without knowing these limits, many buyers tend to start looking at homes that are about 30 percent higher than their income will allow.
It is important to realize that lenders may not always give you a mortgage that is good for your budget, says Consumerfinance.gov. After all, they end up with the house if you default. It really is up to you to determine whether or not it is something that you can afford and that fits into your financial goals.
Get Sellers More Interested in You
If a seller is in a hurry to sell their house, they are not going to even consider talking to someone who may or may not be able to get the money. When you get prequalified for a mortgage, this naturally will get their attention because they know you can probably get the mortgage. Besides, it also gives you a much better opportunity to start negotiating with the seller.
Getting Prequalified Can Help You Prepare for Getting Your Mortgage
Even though it is not necessary to have all your paperwork in order to get prequalified, it will help you get more accurate approval numbers. Remember that if your financial numbers are not at all accurate – which they will find out about later if you apply for a mortgage from that lender – you will probably not get the mortgage, says BusinessInsider.com. Being more accurate will also help you get more accurate limits as to how large of a house you are eligible for.
It Helps You Find a Suitable Lender
Taking the step of getting prequalified will enable you to meet different lenders and find out which ones are really friendly and helpful. Naturally, you want to find one that will work with you and offer advice and instruction about the best way to get your mortgage or help you with sound financial tips. Obtaining a letter of prequalification does not require that you get a mortgage from that company and it is usually free.
You need to be aware that there is a considerable difference between being getting prequalified for a mortgage and being preapproved for a mortgage, says Investopedia.com. When you get prequalified for a mortgage, you only provide the lender with basic information. There is no credit check and no investigation. It is based entirely on what you have told them. A preapproval, on the other hand, requires both a credit check and a thorough investigation into your finances.