Mortgage prequalification is an estimate of how much money you’d likely be able to borrow for a mortgage. It lets you better plan your home search by knowing how much money you have to spend.
You talk with a lender — often over the phone or online — about your debt, income and financial assets. You should be ready to provide the following:
Based on the information you give, the lender provides you with an estimate on the amount of a mortgage available to you. In other words, you can see how much money you could borrow toward a home.
You usually get an answer within hours — or even minutes — of applying. There shouldn’t be any fees, nor does your prequalification expire. It’s a quick, easy way to know how much home you can afford.
With a prequalification, the lender does not verify any of your information and does not do a deep dive into your finances. The results, therefore, should be considered a ballpark figure that helps you determine how much you can spend on a home.
A pre-approval is a much lengthier process that includes an in-depth review of your current financial situation and credit history. You’ll need to demonstrate steady employment, sufficient income to make your monthly mortgage payments and a healthy credit score.
With a pre-approval, once a lender has reviewed your finances (which can take weeks), he or she will certify that, based on the assessment, you qualify for a loan from his or her institution for up to a certain loan amount. That certification will be good for a certain time period (typically 90 days) and can often be renewed.
Once your home search heats up and you’re serious about getting a mortgage, you’ll eventually need to get pre-approved. A pre-approval proves you have the resources to make a home purchase and helps you act quickly when you find the perfect home.
But, if you’re just beginning your search, it makes sense to start by getting prequalified so you see where you stand. You can learn how to get a mortgage later.
Ready to find your dream home? See if you prequalify.