Finding Lenders for Pre-Qualification & Pre-Approval

Shopping for a real estate property is not like buying groceries. It is a massive investment when you are relocating to a new house. You would want everything to go right, which includes understanding your home-buying budget and the process to obtain a mortgage.

Now the question is, “How can you make your home-buying process easier?” One of the ways is to contact the people responsible for providing the loan, the mortgage lenders.

Key Takeaway

Who Are Mortgage Lenders?

Financing is one of the vital parts of realizing your dream and becoming a homeowner. That is where mortgage lenders come in to provide the needed loan to finance your next real estate.

These mortgage lenders can be financial institutions that provide the loan for buying your next property at certain repayment terms. Now, of course, these mortgage lenders won’t provide loans to everyone who comes to them.

There are some factors and indicators that make a good candidate for a mortgage like

1. Debt-to-Income Ratio
2. Employment History
3. Credit Score

If you go straight to the lender to file a mortgage application, you might not get the loan. That’s because you will unsure if your financial standings are good enough to obtain a mortgage.

So, instead of going in for the home mortgage, we have some better ideas. 

1. Mortgage Prequalification
2. Mortgage Preapproval

This is where you might be confused and wondering, “What are pre-qualification and preapproval?” and “How can it benefit me to get a mortgage?”

Let’s talk about it.

Mortgage Prequalification

This is the initial investigation by mortgage lenders to know if you are eligible for a loan. In addition to that, the mortgage prequalification will also provide an estimated loan amount you are eligible for. 

To assess your financial position, the mortgage lender might ask some questions like your:

1. Full name and personal information
2. Total gross income
3. List of debts
4. Current employment status
5. History of financial frauds
6. Credit score

One advantage of the pre-qualification process is that the mortgage lenders will not verify your information yet. They will trust you to provide correct information. This will reduce the prequalification process time.

But along with this benefit, there’s a drawback as well. As the mortgage lenders don’t yet verify the information, the loan amount you get may not be accurate enough.

Another important aspect of preapproval is that there isn’t a check of your credit report. So, when we said earlier that lenders would want to know about your credit history, they don’t access your credit report. This means your credit score will remain the same as it is a soft inquiry.

Mortgage Preapproval

Sticking to mortgage preapproval can spoil your home-buying plans as you won’t have a good idea about the loan you can borrow. That is why homebuyers go for preapproval as well. This is where the mortgage lenders check your creditworthiness.

The Required Documents

This time, the lender will verify the documents to check the loan amount you are eligible for. Some documents that the mortgage lenders would want to assess are:

1. Recent pay stubs
2. Tax returns
3. Bank statements
4. Employment verification
5. Credit Report

Longer Time Required

Since the mortgage preapproval process is different than the prequalification, the timelines may also be different. As preapproval requires mortgage lenders to evaluate the documents, the process may take longer to complete. Usually, the process takes a week to complete.

Will it be worth the time? Yes, it will be. One of the reasons is that since the information is verified, the estimated loan amount you can borrow will be more accurate. That will help you better understand the home-buying budget.

Credit History Check

Along with the timelines, there will be differences in credit checks as well. This time, the mortgage lenders will check the credit report themselves. They will want to know if you have a history of financial irregularities like foreclosures, defaults, or missed payments.

Since the lenders assessing your credit report will be a hard inquiry, this may temporarily reduce your credit score. But that should not be a great concern. After a couple of months, the credit score will be back to normal.

Finding the Right Mortgage Lender

Remember, finding the right mortgage can ensure an easy and smooth home-buying process. After you have the prequalification and preapproval letter in your hands, the next move would be to find the right mortgage lender.

Here are some ideas to find the lender you are looking for.

Check for Reviews

In today’s world, it is easy to access general information about various services like mortgage lenders. If you find a potential lender you want to work with, check out the experiences of their past and current clients.

This will help you decide if this lender is the right one or you need to find a new one. 

Know Your Preferences

There are some lenders who specialize in providing specific loans. Before going on a lender hunt, as yourself, “Which loan do I need?” Once you have decided on the type of mortgage you want, choose the lender who has proven experience in providing that loan. 

Enquire and Ask Questions

One of the qualities of a good lender is that they are transparent and have nothing to hide. If you have a potential lender and you need to clear up confusion, ask questions without hesitation. This can help you know about their service and industry knowledge.

Look for Lender Credits

When some lenders want to stand out, they use lender credits to attract loan seekers to avail their services. This is an incentive to cover the closing cost of the loan. Yes, this may increase the interest rate, but it can significantly reduce your upfront cost.

You can go for the lenders offering lender credits if want to reduce your upfront cost.

Pro Tip
Shop around to get the best lender credit offer. You can go for the one offering the lowest rates over the course of the loan. That’s what lender credits are good for.

The Final Word

You are prequalified for a mortgage, and you have found the right lender to finance your next property. The next thing you need is to find the property that meets your preferences and budget. For that, check out Har.com.

You will see multiple listings of different property types, prices, and locations.