What is mortgage prequalification?

A mortgage pre-qualification will give a potential borrower an idea of what they might qualify for from a lender. Mortgage pre-qualifications are helpful whether you are a first-time homebuyer or seasoned homeowner.

Before entering the housing market, many homebuyers wonder how much they could qualify for with a home loan. Pre-qualifications will give you just that and without affecting your credit score. For a pre-qualification, borrowers will provide basic financial information to give lenders a starting point for what their mortgage will look like.

Pre-qualifications are just an idea of what a borrower could get from a home loan and not a binding contract of what they will get. Getting pre-qualified is a great resource for anyone hoping to learn more about what they could potentially receive from their mortgage before or as they enter the housing market.

When you are ready to enter the housing market, you can start a mortgage application online with a trusted lender.

While some people might think pre-qualifications and pre-approvals are interchangeable terms, they do have different processes and uses.

Both pre-qualifications and pre-approvals show a borrower what a lender could offer in terms of home loans. The main difference is that pre-qualifications are just an idea of what they will give you, while pre-approvals are the real amount borrowers could qualify for.

Pre-approvals require a more rigorous in-depth look into a borrower’s background and financial situation. Because of the more formal process potential buyers go through for a pre-approval, they can give a clearer look into what their mortgage will look like.

With a pre-approval, buyers can take them to sellers as a way of showing them the amount they qualify for. Pre-qualifications, on the other hand, do not hold the same weight with sellers.

To get a mortgage pre-qualification, you will be required to provide your lender with some information. They use this information to help give you an idea of what your home loan could look like.

Some of the information you will need to provide is:

• Income details such as salary, bonuses or other earnings
• Current active debts like credit cards, auto loans or student loans
• List of assets available, including savings, investments, retirement accounts and down payment amount
• Basic credit information or report, depending on your lender, may be self-reported or estimate of what range your credit score may be in

Since your credit information isn’t as in-depth or formal as a pre-approval, your pre-qualification will just be an estimate on what your home loan could be.

Reasons to get pre-qualified

There are many reasons why potential homebuyers decided to get a pre-qualification. Some of the benefits you may see when getting a pre-qualification are:

• Find out how much home you could potentially buy when entering the housing market
• Gain an idea of how much your monthly mortgage payments might be
• See where any potential issues with your credit or debt may be
• Able to compare lenders and the loans you could get with them

A mortgage pre-qualification is an easy process that gives you an idea of what your home loan could look like. Because it is a first step in buying a home, there is not a lot borrowers need to do to qualify.

If you are looking to get a pre-qualification, you will want to find a lender and gather information that could give them an overview of your financial situation. After that, you will be ready to complete an application. With your results, you will have an idea of what your mortgage could look like and how much home you could afford.

After your pre-qualification, you may be ready to start looking to purchase a home and apply for your mortgage.

If you are ready to start your mortgage, you can apply for a home loan today!

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply. 

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate. Rate its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.