Getting prequalified can give you an edge when applying for a mortgage. Lenders generally do not charge a fee for the prequalification process, but the process is similar to applying for a loan. Here is the way to prequalify for home loan.
Steps to prequalify for home loan
Pre-screening has many benefits, including providing an estimate of how much you can borrow to buy your home. Another benefit is that when you find a home to buy, you can speed up the closing because you’ve already completed some steps.
Use Pre-qualification Calculator
The second step to prequalify for home loan is using the online mortgage prequalification calculator before you speak with your lender. This will give you an idea of how much you can borrow for a mortgage. It provides information about credit history, income, assets, and liabilities.
The calculator may also ask you to enter the percentage and term of the loans, as well as the required amount for the down payment. The number you receive may be lower than what some lenders give you, but it should give you an estimate of how much you can afford to pay.
Calculate the debt-to-income ratio.
This is the amount you pay for housing, credit card debt, car payments, and other liabilities related to your gross pre-tax income. According to Bank of America, most lenders don’t want your debt to exceed 36% of your monthly income.
Order your free annual credit report months before the actual home search. You can request reports from each of the three major credit bureaus. Carefully review each report for errors. Allow plenty of time to dispute reporting errors and correct credit issues.
Get qualified with multiple lenders.
Since you are not obligated to borrow from any particular lender, you should compare interest rates to get the best deal. We recommend starting with a regular bank or credit union. If you don’t see the interest rate you want, it’s a good idea to do some research.
Gather the financial documents you will need when you contact your landlord to receive your prequalification letter.
Collect several months’ worth of bank statements, discounts on recent payments, the W-2 forms and tax returns for the past two years, and other financial documents related to assets and investment accounts held.
Please complete the eligibility application completely and accurately.
At this point, the lender may or may not verify the information you provided. You can usually find out if you are prequalified within minutes. Many lenders will also qualify you in the future. The lender will then provide you with a prequalification letter stating that you are eligible for a mortgage at the amount indicated in the letter. That’s all about how to prequalify for home loan. Hopefully, it’s useful