WHat is Pre-Qual Letter
A pre-qualification letter identifies an applicant's ability to get approved for a mortgage loan.
It is issued to an applicant after a mortgage lender completes an informal review of the applicant's borrowing profile to obtain financing for a mortgage.
Getting pre-qualified is one of the most important steps in obtaining a mortgage loan because applicants can shop and compare multiple loan providers without committing to any specific lender.
In this article, we will look at the advantages of starting with a mortgage pre-qualification, and the limitations of mortgage pre-qualifications versus mortgage pre-approvals.
In addition, we will provide the best approach a consumer should take to identify the lowest rate and fee mortgage loan while obtaining both a mortgage pre-qualification and a mortgage pre-approval.
What is a Pre-Qualification Letter?
A pre-qualification letter is a document from a mortgage lender that states the loan amount for which you may qualify based on the financial information reviewed but not verified.
This is a preliminary evaluation that gives you an idea of the mortgage options available to you.
It's important to note that pre-qualification is not a pre-approval or guarantee but rather a preliminary step to help you understand your mortgage options and borrowing capacity.
No credit pulls, spam calls or emails. Just stupid low rates.
Get Pre-Qualified or Try the Mortgage Calculator.
What are the benefits of getting a mortgage pre-qualified?
The most important benefit is that consumers can shop several mortgage lenders' loan offers without committing to any specific lender.
For this reason alone, we see mortgage pre-qualification as the most important step in the home buyer's journey.
5 Benefits of a Mortgage Pre-Qualification:
- Ability to shop and compare multiple loan offers.
- Can use an automated multi-lender prequalification platform in minutes.
- Understand your eligibility for financing.
- Identify your borrowing capacity.
- Identify estimated down payments, closing costs, and monthly payments.
What are some disadvantages of getting a mortgage pre-qualification?
Unless the applicant uses a loan comparison site that performs an automated mortgage pre-qualification and pre-approval app, applicants may spend several hours talking with multiple mortgage lenders to get pre-qualified.
Once the applicant receives the pre-qualification loan terms, they will have to consider all the loan offers to identify the best loan offer.
Disadvantages of a Mortgage Pre-Qualification:
- Unless applicants use an automated pre-qualification platform will take multiple hours.
- Mortgage Pre-qualifications and pre-qual letters are generally not accepted by real estate agents.
- Applicants will still need to obtain a mortgage pre-approval.
Will getting a mortgage pre-qualification letter hurt my credit score?
No, getting a mortgage pre-qualification letter should rely upon a soft credit pull inquiry that does not affect the applicant's credit score.
IMPORTANT: Applicants should confirm with each lender that they will only use a soft credit check when reviewing their credit report.
No credit pulls, spam calls or emails. Just stupid low rates.
Get Pre-Qualified or Try the Mortgage Calculator.
How long does it take to get a mortgage pre-qualification letter?
Getting pre-qualified can take as little as 3 minutes and up to a few hours depending on where the applicant makes this request.
If the applicant uses an online mortgage pre-qualification calculator site that compares multiple loan offers, then the applicant can complete the process in just a few minutes.
Where can applicants get a mortgage prequalification letter and compare loan offers?
Applicants that understand the value of capturing the lowest interest rate and fee mortgage loan in the market should use an online mortgage pre-qualification site that provides real loan offers from multiple mortgage lenders.
How to Obtain a Pre-Qualification Letter?
To obtain a pre-qualification letter, you will need to provide some basic financial information, such as your income, assets, debts, and credit history.
The lender or online mortgage pre-qual and pre-approval site will use this information to determine the maximum eligible loan amount based on the applicant's borrowing profile.
Is a Mortgage Pre-Qualification Letter the same as a Mortgage Pre-Approval Letter?
No, a mortgage prequalification is an informal preliminary confirmation of eligibility.
A mortgage pre-approval is the process of reviewing all supporting income and asset documents, along with a soft pull credit inquiry to ensure eligibility barring any changes after the pre-approval has been issued.
Should I get Pre-Approved after I get Pre-Qualified?
Yes, the correct process to buying a home is first obtaining a mortgage pre-qualification, then requesting a mortgage pre-approval with the lender that offers the lowest interest rate and fees.
How to obtain a mortgage pre-approval with the same online pre-qualification site?
Yes, using this online mortgage prequalification and instant pre-approval site you can get pre-approved after getting pre-qualified.
No credit pulls, spam calls or emails. Just stupid low rates.
Get Pre-Qualified or Try the Mortgage Calculator.
How to identify the pre-qualified loan offer with the lowest interest rate and fees?
Comparing multiple pre-qualified loan offers can be confusing unless you rely upon the annual percentage rate (APR), which factors in all closing costs, discount points, origination fees, mortgage insurance, and upfront funding fees.
PRO TIP: Identify the best loan offer by selecting the lowest annual percentage rate from all the loan offers provided.
How do I get pre-approved after getting pre-qualified?
To get pre-approved, the mortgage lender will need to review all income and asset documents; therefore, applicants will need to upload the documents the lender request.
Required Income and Asset Documents:
- 1 month's most recent paystubs.
- Last 2 years' IRS Tax Returns or W2s.
- Assets: 2 months bank statements, 401k, Stocks & Bonds.
- Additional Income: Proof of Social Security, Pensions, and Child Support.
- If Self-Employed: Year-to-date Profit and Loss Statement.
With this online mortgage platform, applicants can either upload the required income and asset documents during the pre-qualification process or at a later time.
How long does it take to get pre-approved after uploading income and asset documents?
To issue a verified mortgage pre-approval letter, the lender will need to carefully inspect the loan request, and the income, assets, and credit report of the applicant(s).
Typically, this will take less than 24 hours, depending on the time of day the documents are uploaded.
No credit pulls, spam calls or emails. Just stupid low rates.
Get Pre-Qualified or Try the Mortgage Calculator.
What should an applicant do if denied a loan pre-qualification or pre-approval?
If an applicant is denied for a mortgage pre-qualification or pre-approval, then the applicant should validate the information that was used to render the denial.
If the information is correct, the applicant should consider the following items to improve their ability to qualify for mortgage financing:
- If denied for insufficient income: decrease the loan amount, by making a larger down payment decrease the sales price, or pay down existing debts to lower the applicant's debt-to-income-ratio.
- if denied for an unacceptable credit rating: obtain secured credit cards, and make timely payments, pay-down current revolving debt balances to 30% of high credit limit, resolve collections and make payments on time.
No credit pulls, spam calls or emails. Just stupid low rates.
Get Pre-Qualified or Try the Mortgage Calculator.
Summary of Mortgage Pre-Qualifications to Buy a home
The value of a Mortgage pre-qualification is often minimized by real estate agents and some mortgage professionals.
It is the consumer that will be obligated to pay the mortgage, and therefore, should use every tool available to identify the lowest rate and fee loan before committing to a mortgage pre-approval with any specific mortgage lender.
I have spent over 22 years helping homeowners and homebuyers secure mortgage loans using a non-bias approach with the understanding that the cost of financing on mortgages has a major impact on the consumer's net worth.
Embrace the journey of buying a home, by taking an active role in one of life's most important decisions.
