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Buying A Home – How Important Is Your Loan Prequalification?

By Sarah P. Shimanski

If you’ve been through the home buying process already, you’re familiar with the age old advice to seek out a prequalification with a lender to know how much home you can afford. It seems like most sellers won’t give you the time of day unless you can show proof you’re a serious homebuyer. The reality is how much home you can qualify for depends on you.

There are many factors that influence the price of home you can qualify for. Can you net more income by adding a second job? Can you slash expenditures that aren’t a priority? Had you decided what financing option you want to utilize? Are you a first time home buyer? Will the developer assist you with financing the deal? Is your family or friends willing to assist you will by lending money? Can a portion of the property be rented out for additional income? There can be a myriad of factors that influence your prequalification.

How you answer these questions determine the amount of home loan you can qualify for. As you inspect homes for sale, it’s a good idea to console with a reputable loan agent or real estate agent trained in assembling these types of transactions. Beware of prequalifications produced by generic fill-in-the-blank forms on a computer. By arranging an appropriate lender and seller, you could qualify for a better home.

Obtaining a prequalification with one solitary mortgage company only offers you a limited view of all the possible financing options available to you. A particular lenders prequalification letter only tells you one financial option when you work with them. It won’t inform you about the many other financial alternatives open to you. The best way to explore all possible financial avenues is to take advantage of every opportunity to negotiate a winning combination of lender and seller.

The prequalification letter you receive from a mortgage lender gives you an estimate of what you can borrow based on the data you supplied to the bank. It’s important to know this letter does not guarantee the lender will make you a loan.

The only method that will almost guarantee your ability to secure a mortgage loan is to qualify for a pre-approval. You can get a lender to pre-approve you for a certain loan amount, even if you haven’t started searching home listings. One major benefit of receiving a pre-approval is you can negotiate an effective deal because you know your exact limitations. Plus Realtors and sellers will negotiate more seriously with you since they know you’re already pre-approved.

However, a pre-approval has the same limitations as a prequalification because your borrowing power is dependent on the bank you use, the loan program, interest rates, and your financial history. It’s important to know your pre-approval provides only a small glimpse of your purchasing possibilities. While pre-approval offers a greater commitment from the bank, it’s still dependent on their verification of your information and the property’s ability to satisfy their guidelines.

Are you searching for the best Villa Park homes for sale? See what these Villa Park Realtors can do to help you find your dream home.

Article kindly provided by UberArticles.com

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Article Citation
MLA Style Citation:
Shimanski, Sarah P. "Buying A Home – How Important Is Your Loan Prequalification?." Buying A Home – How Important Is Your Loan Prequalification?. 1 Jul. 2010. uberarticles.com. 18 Feb 2016 <http://uberarticles.com/real-estate/real-estate-fsbo/buying-a-home-how-important-is-your-loan-prequalification/>.

APA Style Citation:
Shimanski, S (2010, July 1). Buying A Home – How Important Is Your Loan Prequalification?. Retrieved February 18, 2016, from http://uberarticles.com/real-estate/real-estate-fsbo/buying-a-home-how-important-is-your-loan-prequalification/

Chicago Style Citation:
Shimanski, Sarah P. "Buying A Home – How Important Is Your Loan Prequalification?" uberarticles.com. http://uberarticles.com/real-estate/real-estate-fsbo/buying-a-home-how-important-is-your-loan-prequalification/


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