If you ask a homebuyer what the first step is in buying a home, they will likely say, “finding a home you like.”
In reality, it has nothing to do with the home itself. The crucial first step in buying a home is actually getting pre-qualified for a mortgage.
Failing to get pre-qualified sets you up for a couple of issues down the line. The biggest one is the disappointment of finding a home you love, only to find out later you can’t qualify for the mortgage needed to buy it.
Another issue is creating an unnecessary delay that causes you to lose the home before you have an opportunity to make an offer on it.
“In some states like Arizona, a pre-qualified mortgage is required as part of an offer that is submitted by a realtor as stated on the purchased contract,” said Linda Matejko, a broker with Arizona Elite Properties in Chandler, Arizona.
“While getting pre-qualified only takes a few business days, in a hot market like Phoenix where there is limited supply, that lost time could mean the difference between having time to submit an offer on a home or having someone else buy it from under you.”
To begin the mortgage pre-qualifying process, the lender will give you a form that requests different pieces of financial information like income, tax returns, cash reserves, debt and down payment.
This information is reviewed, and the lender provides you with a mortgage amount and interest rate you are approved for. Armed with this information, you have the confidence to know you have the buying power for the home you wish to purchase.
Take note that a pre-qualification is different from a pre-approval. We’ve all seen the commercials or online ads for lending companies like Quicken Loans and Lending Tree, where buyers can get approved in a few minutes through an online application or quick phone call.
The problem with these options is despite the pre-approval, you aren’t necessarily locked in for the mortgage you need.
The online lenders typically ask general questions, and based on the information you provide they give you an amount you are approved for. However, people can lie, give incorrect information or forget something vital that could impact the true amount you are qualified to borrow.
To be sure you received an informed answer, a pre-qualification is the best way to go; and this applies to all forms of mortgages whether it is conventional, FHA, VA, etc.
If you are a prospective homebuyer and need guidance on how to begin the mortgage pre-qualifying process, contact a local realtor and ask them for recommendations on a lender along with any other questions you may have.