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How to Prequalify for a Home Loan

Feb 3, 2008
To be pre-qualified for a loan means that a lender has done a preliminary review of your basic information and, without confirming any of it for validity nor checking to see if there's any significant information you've withheld that could further affect your creditworthiness, has determined that, based on their standards, you would qualify for a loan up to a specific dollar amount should you apply with them.

Being pre-qualified does not mean that you are pre-approved. Pre-approval is a commitment to approve you for that loan, should all the information you've provided be accurate and complete, whereas pre-qualification just means that, according to their standards, you look to qualify for said loan amount.

Getting pre-qualified has several advantages, the primary benefits being:

* pre-qualification lets you know how much you can actually afford on a home, which helps tremendously in focusing what could otherwise be an overwhelming house-hunting experience;

* pre-qualification demonstrates to sellers that you are serious buyer who is ready, willing, and able to follow through on an offer;
* pre-qualification helps the whole mortgage application process to go through much faster, as a great deal of the information you need to provide is already in the lender's possession;

Another advantage of pre-qualification is that pre-qualified borrowers can usually lock-in their interest rate, a huge benefit when you consider how much interest rates can rise between the time you start your search for a home, the time you complete your loan application process, and the time you close on the house. There may be a lock-in fee, but if it's reasonable, it's usually worth it. Locked-in rates are usually valid for 30-90 days, depending on the lender.

When trying to lock-in an interest rate, ask whether the lender has a "float down" feature. This allows you to lower your interest rate once, if prevailing rates go down during your lock-in period, preventing you from getting stuck with a higher interest rate than if you hadn't locked it down at all.

It doesn't take much time at all to get pre-qualified for a loan. Quite often you can apply online and have an answer in just a few minutes.

Typically, in order to pre-qualify for a loan, you'll need:
* personal information (such as your name, address, phone number, social security number, date of birth, etc.);
* kind of home you're seeking and the approximate price;
* desired loan type (ie. fixed rate, adjustable, interest-only, No Doc);
* how much of a down payment you'd like to make (and can afford);
* your history of employment history
* your current financial information (including income, assets, expenses, and obligations).

Prepare all this information in advance and you'll save even more time in the loan approval process and thereby speeding up the process of getting you into your new home.
About the Author
Somerset Mortgage Lenders has been in business since 1979. Whether you are looking to refinance your mortgage, consolidate your debt, improve your home, we can help. Call us toll-free at 1-800-675-9783 or visit us online.
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