What is Pre-qualifying?
To pre-qualify you for a loan, a lender calculates a loan amount
you can receive based on information that you provide.
Information includes your income, expenses and debts. If you add
the earnings of a spouse or parent as a borrower, your pre-qualifying
amount will be higher.
Think of this as a preliminary estimate of the loan you might receive.
If the information you provide is incomplete or inaccurate, the
loan amount will change.
Your lender will use the information you provide to calculate your
ratios. These ratios and any compensating
factors will help determine which loan products and
financing are best for your situation.
Different loan types have different guidelines for qualifying ratios.
Your lender usually will not recommend a loan product until you
complete a loan application. However, once lenders determine qualification
ratios, they have a preliminary idea of which loan types to recommend.
Many lenders use automated electronic systems to help them pre-qualify
borrowers for loans.
Later in this lesson, you will learn more about these loan
types and how the lender helps you select the best one.
What is Pre-approval?
To pre-approve you for a loan, a lender calculates the loan amount
you can receive based on information that a third party provides.
The lender verifies your information via a credit report. The credit
reporting agency acts as a neutral third party. Consider this a
firm estimate of a certain loan amount. Final approval depends on
whether the property also meets requirements for a loan.
Searching for Prospective Homes
Your chances of finding the home you want will be better, the more
homes you see. Visit as many homes as possible. No one can force
you to buy what you do not like and everything about a home, including
the price, condition, and features, are negotiable.
Internet Field Trip
Take a brief online trip to go through one of the
first steps of pre-qualifying for a loan. You will learn how much
house you can afford. Then, you can use a tool to help you search
for a specific home by its address and price. Read all the steps
before you begin.
- Click Calculators - http://www.homeloanlearningcenter.com/calculators
This will take you to the Home Loan Learning Center
- Locate the
"How much house can I afford?" calculator.
- Enter the appropriate amounts in the boxes.
- Click Calculate. Note: You can change the amounts
and see the results.
- Click the Close box to return to the course.
- Click the What's
It Worth link. This will take you to
a vendor Web site to check home values.
- Locate and click the sample report: Comparable
Sales to view the information about similar homes
in a neighborhood.
Note: This vendor charges a fee that varies depending
on the type of report. When you know what it's worth,
you can negotiate a home's price, features, and almost
all other aspects of the property better.
- Click the Close box to exit.
Searching for a home takes persistence.
The next section will show you some alternative ways to search
and buy a home.