What is prequalification?
If you’re thinking about buying a home, you’ve probably heard the term “prequalified”. But what does it actually mean? Does it guarantee loan approval? Understanding the significance of being prequalified can help you navigate the mortgage process with confidence.
What Is Mortgage Prequalification?
Prequalification is an initial assessment of your financial situation that gives you an estimate of how much a lender might be willing to lend you for a mortgage. It’s typically a quick and easy process that doesn’t require a deep dive into your finances.
How the Prequalification Process Works
- To get prequalified, you’ll usually provide a lender with basic financial information by completing a loan application. You will provide information such as:
- Your income
- Your employment history
- Your debts and monthly expenses
- Your assets (like savings and investments)
The lender may run a credit check and use this information to estimate how much home you might afford. Within minutes to a few days, you’ll receive a prequalification determination.
Advantages to Getting Prequalified:
- Gives You an Idea of Affordability: It helps you understand what price range to look at when house hunting.
- Shows Sellers You’re Serious: While not as strong as a preapproval, some sellers and agents will take prequalification as a sign that you’re a legitimate buyer.
When Should You Get Prequalified?
Prequalification is a great first step if you’re just starting to explore homeownership. It helps you understand how much home you can afford before diving into house hunting. If you’re ready to make serious offers, though, you’ll want to get preapproved instead.
While a prequalification can set you up for a successful home buying transaction, it is not a guarantee from the lender.
Written by: Amanda Eaton
Amanda Eaton is a Jonesboro, AR based secondary market lender serving customers in Arkansas and Tennessee as our Mortgage President. Whether you're a first-time homebuyer or long-term real estate investor, Amanda and her team offer simple, proven, reliable service for all your home loan needs. Apply online or call our mortgage team at (870) 215-4723 ext 1006.