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Pre-qualify for a mortgage

Step 2 - Pre-qualify for a mortgage

Smart buyers understand the importance of being pre-qualified before they start their property search. Here are a few good reasons to get pre-qualified.

  • You want to make sure all of your credit issues are properly resolved.
  • You want to know how much money a lender will loan you.
  • You want to have an estimate of your downpayment and closing costs.
  • You want to know what interest rate you will be charged, the terms of the loan, and how much your monthly payment will be.
  • You want to provide sellers with proof that you can obtain the necessary funds to purchase their property.
  • You will have peace of mind knowing you are pre-qualified for a specific amount.
  • You want to expedite the mortgage process by having your paperwork ready for underwriting approval.
  • You want to be able to compete favorably with bids brought by other buyers.
  • You want to know if the property you are about to buy has any special financing restrictions.

To be pre-qualified, consult a lender in our Helpful Pros directory. Most lenders should be able to pre-qualify you over the phone and pull your credit score. Once pre-qualified, the lender can email you a mortgage pre-qualification letter. Buyers with good credit can usually obtain a pre-qualification letter within a couple of hours. If you have serious debt issues, you may wish to talk to a consumer credit counselor or debt consolidation specialist. Obtain a Pre-qualification letter and be ready to buy!

After you are pre-qualified, make several copies of your pre-qualification letter because you may end up negotiating on more than one property. Each offer you present to a seller should have your pre-qualification letter attached to the offer.

It pays to shop for a mortgage because not all lenders offer the same loan programs or charge the same fees. You should shop for the best interest rate available and find a lender who offers good service. Examine each lender’s closing costs and application fees. Become a knowledgeable buyer and learn about the different types of loan programs. An experienced lender will discuss the various types of mortgages available to you, including Conventional, FHA, and VA mortgages.

Ask your lender for a free Closing Cost Estimate. This estimate will provide you with a full breakdown of all closing costs and will indicate the total amount of money you will need for closing. This estimate will also indicate your monthly mortgage payment - PITI (Principle, Interest, Taxes and Insurance). If your property taxes are to be escrowed into the mortgage, it is important the correct property tax amounts are reflected in your estimate.

A few final words of advice: Be cautious of online lenders that charge upfront fees. Many buyers have been scammed by so called online lenders! Qualified lenders will pull your credit report for free and give you advice before they take a loan application. Be leery of high interest rate loans and adjustable rate mortgages; sometimes it may be better to save more money and delay your purchase until you can obtain a normal interest rate loan.

If you need to close quickly on a property, then find a lender that will provide you with a preliminary mortgage approval. A pre-approval or commitment letter can be issued before you locate a property. The commitment letter can be issued “subject to” a property appraisal. To be pre-approved, find a lender that wants your business and start the application process. Doing so will save you time and allow you to close more quickly.
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