Pre-qualification is just a term used for an assurance given by the lender in form of a certificate or letter specifying the maximum loan amount. This helps you to determine your budget, before buying a house or any such property. Based on your financial status, like your earnings, credit history, savings and debt, they decide the net mortgage loan you can qualify for. In short, with the help of financial information you provided, the lender calculates your affordable loan. This however is useful for all the three parties involved: the lender, you (the borrower) and the seller.
The pre-qualify process is usually free of fee payment. Also you can go online, like mortgage calculator, to find out how much you qualify by just giving the details of your income, credit score and debt ratio. Once you are done with this pre-qualification, you can go ahead to decide how much loan you would like to take. Few of the advantages of using pre-qualify method are:
- Thousands of dollars are saved during negotiation with the seller and paying a lower rate.
- You get to know your actual price range.
- You will be considered as a serious buyer for the real estate agents.
- The overall procedure of mortgage application will be faster, since you have already provided the lender with your financial information.
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