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The Benefits of Getting Prequalified for a Mortgage

November 24th, 2014

The Benefits of Getting Prequalified for a Mortgage

One of the best things you can do to make the homebuying process go more smoothly is to get prequalified for mortgage financing. This is when potential lenders, such as Axiom Financial, will take a look at your information and let you know what amount you may be approved for when taking out a mortgage. They will consider your credit information, your income level, and other key factors to determine how much house you qualify for, and then give you a written statement outlining your prequalifications.

Shopping in Your Price Range

Finding your dream house, and then finding out that you can’t afford it is disappointing. Getting a prequalification before you begin home shopping lets you know how much you can afford to spend on a home, so you can shop within that price range. This really narrows your search down, making it easier for you to sort out which properties you want to take a serious look at. Your prequalification will also give you an idea of what your monthly mortgage payments will look like, so you can make sure that they fit within your budget and savings goals. You don’t have to spend the total amount on a house that you’re prequalified for. You can shop in a range that’s comfortable for you.

Being a Top Bidder

In a hot real estate market, there will often be multiple offers on a home. Many people assume that the highest bidder is automatically chosen, but this isn’t necessarily the case. Usually the seller will choose the most qualified bidder. The seller doesn’t want to enter into a contract with a buyer, have all the other bidders drop out, and then have the sale fall through because the buyer couldn't get financing. In order to avoid this type of situation the seller will almost always choose a buyer who is prequalified for financing. You can include your prequalification information with your offer. It can significantly strengthen your bid. If you don’t have a prequalification, you might find yourself out of the running in a bidding war.

Prequalified is Not Preapproved

There’s an important distinction in mortgage terminology between “prequalified” and “preapproved,” that potential homebuyers sometimes confuse. Prequalified means that a lender has considered the information you provided and has issued an estimate of how much you would probably qualify for if the information is documented. Preapproved means that the lender has gone through their lending process and is willing to extend a mortgage to you based on verified information. A preapproval is usually time sensitive and states that your mortgage is guaranteed to be put in place as long as you choose an appropriate property within the given amount of time. A prequalification is meant to give you some shopping guidelines, while a preapproval is a more serious step towards working with a specific lender.

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