Did you know that most realtors will not even take you out shopping for homes without you first being pre-qualified by a mortgage lender?
The reason for this is because you have no way of knowing how much you can afford or if you will even be able to obtain a loan at all without first talking to a mortgage advisor.
A mortgage pre-qualification is an initial estimate of what type and size of mortgage a borrower could get. It is limited because it’s only based on what the borrower tells the lender (which may be different than what the lender finds out later on), but it is necessary to start house hunting.
To get pre-qualified, a borrower starts by finding a lender. Typically, you will give the lender basic information on your ability to borrow. This includes income, how much money you have in the bank, your current payments, and an estimate of your credit worthiness.
Based on the information the you give, your lender is able to offer multiple loan options. For instance, if you don’t have a lot to put down but you’re active-duty military, your lender might offer a VA loan as an option.
Pre-qualification gives the borrower a sense of the likely interest rate and of the loan amount he can borrow. Generally, this is enough to let a borrower start looking at real estate listings with a realistic sense of what will be affordable.
The Digital Mortgage
With Dash Mortgage, all of this can be done online at any time (day or night) in about 15 minutes, and the pre-qualification you get back is actually a much stronger pre-approval because the digital system is able to corroborate the information you are inputting.
For example, if you allow it, the application can automatically pull banking information to ensure you have the assets for a down payment you are claiming. It also pulls your credit information to verify your score. Neither of these are done in a traditional pre-qualification.
This pre-approval puts you in an even stronger standing when you are searching for houses because you have undergone a more rigorous process – all in under a half hour while sitting on your couch watching TV.
The Strongest Approval of Them All
When it comes time to start writing offers, though, a mortgage pre-qualification and a pre-approval are missing one important factor – underwriting.
Your mortgage advisor may ask you to start submitting documentation once you’ve gotten your pre-qualification letter so they can start processing you loan. They are doing this because they know your ability to find a home will be stronger if your file is sent through underwriting.
As a borrower, when you go beyond a pre-qualification to get underwritten approved, you submit your credit for the lender’s underwriting department to thoroughly check. That way, your qualifications get confirmed and you get approved for the loan in advance of choosing the house. The lender can issue a more binding letter that not only lets you know what you can afford but also lets you show a seller that you are the most serious buyer making them an offer (meaning you’ll be much more likely to win a bidding war for the house you want).
So first step to purchasing a home? It’s always to get pre-qualified.