When you are looking to buy a home, there are two terms you will hear, both of which are related to getting a mortgage loan: pre-qualification and pre-approval. Understanding these terms is very important because they will help you know what you can afford to purchase, and they will demonstrate to a seller that you are a serious buyer.
A mortgage prequalification means that you provide a lender with some general financial information, which helps to estimate how much you can afford when buying a home. The information provided is usually self-reported and doesn’t include a credit report. So, although it is helpful in the process, it does not carry as much weight as a preapproval.
When you are preapproved, you have submitted your financial history and the lender has verified the information by checking your credit report, employment and income, as well as assets and debts. Information that will be needed include total monthly expenses, pay stubs and W2s, and either current rental details or mortgage statements. A preapproval letter serves as an offer by the lender with the type of mortgage they will lend and an expiration date of the offer.
Be prepared when seeking mortgage preapproval. Get your own credit score and review it for any errors. Calculate your debt-to-income ratio, which should not be more than 36% of your gross monthly income that pays installment debt. Gather the documents your lender is going to require and find a lender that is right for you.
We, at Whippet Properties of Florida, have reputable lenders available who are willing and able to help in any financial situation. Let us help you with that first step to homeownership!