Pre-qualification is an early step in the journey home. When you qualify for a home loan, you get an estimate of what you can borrow based on your finances as well as your credit check. The pre-qualification is also an opportunity to learn about the various mortgage options and work with the lender to find the right fit for your needs and goals. Can I prequalified for a mortgage online?
What is a pre-approval mortgage?
Initial acceptance is as close as possible to confirm your creditworthiness without entering into a purchase contract. You will complete a mortgage application and the lender will verify the information provided. They will also carry out credit checks. If you are pre-approved, you’ll receive a pre-consent letter, which is an offer (but not an obligation) to borrow a certain amount, good for 90 days.
How to use the pre-qualification calculator
On the web you will find a pre-qualification calculator that can give you an idea of what to expect before talking to the lender. All you need is some information about you and your finances:
- Enter your annual pre-tax income.
- Enter the date of the mortgage being considered.
- Enter the interest rate for your type of mortgage or use today’s mortgage rate.
- Select the scope of credit assessment. (Not sure? Get a free credit score.)
- Tell me about your employment status.
- Notify if you have an advance.
- Inform about previous exclusions or bankruptcy.
- Enter your monthly recurring debt repayment.
After completing each required field, you’ll see the recommended loan amount as well as the higher loan amount. We display two prequalification amounts because:
Different loans have different requirements for debt to income. For example, conventional loans usually have stricter DTI requirements than FHA loans, insured by the Federal Housing Administration.
Borrowing 100% of what the lender offers is not always wise. The maximum loan amount is what the lender will gladly lend you, and it makes no sense for your budget. A higher loan amount means a higher monthly mortgage payment. Borrowing too much money can make it difficult to get unexpected financial problems, such as losing your job or large medical bills.
Here’s how to choose a mortgage lender
Looking at the annual interest rate (APR) is the best way to compare lenders because it shows the total cost of the loan. It informs you about the interest rate the bank will charge for the loan, but also takes into account any additional costs that you will have to pay to get the rate, such as mortgage (or discount) points or fees for setting up the lender.
Ask yourself the following questions to weigh your mortgage lender and loan options:
- Do you currently have a relationship with the lender?
- What level of service does the lender provide?
- How easy will it be to access accounts, pay bills and get help?
- Does the lender offer different loan options?
- Which loan program is best for your needs?
- How much does the lender charge for initial fees?
