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Mortgage Library: Loan Application Process: Prequalification
|Before you start looking at homes, you need to have some idea of what you can afford. You can get an idea of what priced house you can afford by doing some simple calculations on your own. But because of many different factors involved, including your own financial situation and variations in the
qualification guidelines for different mortgages, the most easiest and accurate way to determine how large a mortgage you can qualify for is to talk to a lender. So, before you begin your search for a home, it makes sense to speak with several local mortgage companies to check your mortgage power and see whether you can be prequalified. Lenders can also help
you decide the kind of mortgage that's best for you.
During the prequalification process a lender analyses your financial situation applying basic underwriting standards (such as housing and debt ratios) and provides an estimate of how large a mortgage you can afford.
Then lender provides a prequalification letter or certificate indicating the maximum loan for which you would qualify, usually subject to a satisfactory property appraisal and further verification of income, employment and credit history. While it doesnít obligate the lender to approve your loan, itís a way to help ensure that you will apply for a mortgage loan within your price range. Some prequalification programs even provide a preliminary evaluation of credit history.
Generally, there is no fee for prequalification.
It is highly recommended that you get prequalified before you begin your search for a home because:
Prequalification through a lender doesn't have to commit you to finance your home through that same lender. Indeed, if anything it's simply a chance for the lending company to market its services.
Today many lenders can prequalify you online. Visit our Mortgage Lender Directory to find such lenders in your state. [Just click the "Pre-qualify Online" button, and you will be taken to the online pre-qualification form.]
When you have been prequalified, ask the lender how long it will take to get your loan approved. It will help you to determine the right closing date you should designate in your purchase agreement.
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