QUALIFYING FOR A HOME LOAN
QUALIFYING FOR A LOAN
The most important question when buying a home is “How much home can I afford?”. This process of deciding how much you can afford involves analyzing assets, income, and debts. This is called “qualifying” or “pre-qualifying” if it’s done before shopping for a home.
Pre-qualifying for a home drastically reduces troubles associated with buying a home, and saves you time. The process of pre-qualifying does not involve pulling your credit, but can help get an idea of a price range you should be looking in.
Pre-approval takes pre-qualification a step farther, and the lender actually runs a credit report and looks into income and expenses to determine a pre-approval amount. Based on this information, a pre-approval letter is provided by the lending institution. This document helps real estate professionals when it comes to offers and negotiations because it lets them know your actual buying power. Pre-approvals can come from multiple lenders, but keep in mind that each time involves a credit check that will show up on future credit reports.