Getting ready to purchase a house is an exciting and nerve-wracking journey. With so many steps on the road to becoming a homeowner, we know it’s easy to feel overwhelmed. There is one step you can take that will get you closer to owning a home. As a bonus, it helps you sort out your budget and boost your chances of sellers accepting your offer. The answer to some of your house hunting worries is pre-qualification for a mortgage.
Most real estate buyers have heard that they need to pre-qualify or be pre- approved for a mortgage if they’re looking to buy a property. These are two key steps in the mortgage application process. Some people use the terms interchangeably, but there are important differences that every homebuyer should understand.
Pre-qualifying is just the first step. It gives you an idea of how large a loan you’ll likely qualify for. Pre-approval is the second step, a conditional commitment to actually grant you the mortgage.
Getting pre-qualified involves supplying a bank or lender with your overall financial picture, including debt, income, and assets. The lender reviews everything and gives an estimate of how much the borrower can expect to receive. Pre-qualification can be done over the phone or online, and there’s usually no cost involved.
Pre-qualification is quick, and should usually taking just one to three days to get a pre-qualification letter. Keep in mind that loan pre-qualification does not include an analysis of your credit status (no credit bureaus and thus no such 3rd party reports in the Bahamas. They are in the long past due process of being finalized) or an in-depth look at the borrower’s ability to purchase a home.
The initial pre-qualification step allows for the discussions of any goals or needs regarding a mortgage. The lender will explain various mortgage options and recommend the type that might be best suited.
Getting bond prequalification: What are the benefits?
- You’ll know what you can realistically afford, so you can start house hunting with the right price bracket in mind.
- You’ll know your credit score.Banks in the Bahamas have internal credit rating scores. In the United States, ideally your credit score should be above 600 in order to have your home loan application approved by the bank (670+ is considered an good credit score for this purpose). If you have a low credit score, you should look at ways to improve it, such as by paying your accounts in full and on time, clearing your credit card debt, and closing accounts once you’ve paid the balance owed.
- As a qualified buyer, you make your offer to the seller that much strongerby demonstrating that you have done your homework on how much you can afford to pay.
You may think that getting pre-qualification adds another item on your house hunting to-do list. However, getting mortgage pre-qualified makes buying a house less stressful in the long run. By getting pre-qualified, you can:
- Know your budget: With pre-qualification, you can narrow down your pool of potential homes. Build your budget based on what a lender is willing to provide. You’ll have an upper limit that helps you avoid looking at top-dollar homes that aren’t within your budget.
- Surpass other potential buyers: Having your pre-qualification in hand gives you an advantage over other possible buyers. It shows that you are ready and willing to purchase a home. Your competition may not have their pre-qualifications ready, so if you do, you’ll be more attractive to sellers than other buyers who aren’t as prepared.
- Make your offer more attractive: When you find your dream home and put in an offer, you want agents and sellers to pick you without hesitation. Mortgage pre-qualification helps put a seller’s mind at ease. Make them more likely to accept your offer with a simple step.
- Save time: Pre-qualification allows you to finalize your mortgage more swiftly after you’ve found the home of your dreams. There’s no need to fill out paperwork and wait for lenders to process it when you’re eager to get settled in your new house. Take care of everything beforehand so you have one less task to worry about as you buy a home.
- Solve any problems: As you obtain your pre-qualification, you may come across errors made by your Bahamas bank or in the USA, in your credit report or other documentation. Discovering these issues before purchasing a home will save you time and hassle.
- Plan other expenses: Having a price range to play in helps you map out additional costs that come with a home. Be sure to incorporate these into your budget so that you do not risk going over what the lender can provide. Calculate your current expenses in the mix, as well, for accurate numbers.
Mortgage pre-qualification says a lot to agents and sellers. Acquiring it can be a great tool to keep in your back pocket when negotiating pricing, competing with other potential buyers, or submitting an offer on your dream home. Such an impressive part of your application may seem like it would be difficult to acquire, but many processes for pre-qualification are more straightforward than you might expect.