Looking for a home can be a daunting process that involves several different details and substantial amount of money. You have to be concerned about what mortgage you can afford, whether or not you should apply for a fixed rate or an adjustable rate and what your closing cost fees will be.

But before you dig into the details of applying for a home loan, it is advisable to take small steps and determine what mortgage finance opportunities are available to you. The first step to take is quick, harmless and does not bind you to any agreement or contract. See if you prequalify for a home loan. Prequalification applications usually take less than five minutes to complete, they process through the mortgage banks in typically a business day and give you a good idea of how much home you can afford. 

What does it mean to “prequalify for a home loan?”

The purpose of prequalifying for a home loan is to discover which types of loans you will be qualified for and what price range to stay in when house-hunting.   

A lender will review your financial situation and estimate the amount of loan you qualify for. To begin the prequalification process, find a local mortgage bank with a strong team of lenders. Most mortgage banks should offer prequalification forms you can easily complete online in less than five minutes. Once your form is submitted, it is reviewed and a bank representative should call you back in one business day to give you feedback.  

What information does a prequalification form require?

The typical prequalification form will ask for the following information:

• Do you currently own or rent a home?
• How are you paid (hourly, salary, commission, self employed)?
• How long have you been employed?
• Will there be a co-applicant (such as a spouse, partner or roommate) and what is his/her financial information?
• How many bills do you pay a month (vehicles, credit cards, student loans, etc.)?
• What is the estimated amount of the loan you are requesting?
• Do you prefer a fixed rate or an adjustable rate mortgage?
• Is this a purchase or a refinance?
• Will you give permission to the bank to run a credit report on you?

Be sure you have all of your financial information ready before you start filling out the form. Prequalifying can be a quick process, but it’s important to submit accurate information. In order to buy a house and successfully apply for a mortgage, you are going to need your financial ducks in a row. When reviewing your submitted form, lenders will be looking to make sure you meet the following standards:

• At least two years of steady employment with consistent or increasing income
• A credit score of at least 620 to be considered for a loan, but a credit score of 740 will normally qualify you for the best mortgage terms
• No bankruptcy within the last two years
• No foreclosure within the last three years
• Total monthly payments equaling 45 percent or less of your monthly income

What happens next? 

Once you complete the prequalification form and submit it to the mortgage bank, you should hear back quickly to discuss your desires and corresponding options. Depending on the level of prequalification (how much information you have supplied the bank) most mortgage lenders will send you a letter stating the size of the mortgage you prequalified for as proof of your prequalification. This is not a commitment or guarantee that you will receive this type of mortgage, but it does show you are prepared and ready to begin the home shopping process.

When it comes to buying a house, your offer can carry far more clout if you have proof of prequalification. As mentioned before, it is not a guarantee, but it will show the seller that you are serious about purchasing and paying off the house and you have the finances to do so. It is important to continue with the loan process to move toward a more firm idea of your ability to qualify for the loan you want.

What is the difference between prequalifying and getting preapproved?

Very often the two terms “prequalification” and “preapproval” are interchanged as if they mean the same thing. While they are similar steps toward attaining a home loan, they are two different processes and therefore do not mean the same thing. A preapproval is a step closer to approval than prequalification and requires more confidential information such as account numbers and balances. Preapproval is a deeper dive into your finances as lenders look at your current income levels and work history to ensure you have a legitimate and stable source of income. During this process, you will need to supply documentation of your income, assets (money you can use toward down payment and closing costs so the lender can verify the information used in the prequalification.

The lenders will also run a full credit check to see if you’ve had any financial problems, such as missed payments, accounts in default or personal bankruptcy. Your mortgage and interest rates can be determined by your credit score. If you have a high credit score, you will typically qualify for lower interest rates since you will most likely be less of a risk to your lender. This process usually takes seven to 14 days to complete. If you are successful, your preapproval will last for 60 or 90 days (so long as the information you provided does not change), after which you must reapply to ensure the loan offer is still on the table. If more than one month has lapsed since you approval, you must still be prepared to provide updated income and asset documentation to prove your situation has not changed negatively.

If you are interested in seeing if you prequalify, simply click the big button below to fill out a quick-and-easy online form.

Or if you would prefer to think on it a bit more, click the other big button to print a copy of the prequalification form to fax or mail back to us.