Let’s assume you’re on the house hunt. Maybe you already have a real estate agent on your side, and perhaps you even know which part of town you want to live in. Likely, you have a budget in mind. But how do you know what you can really afford and get approved to purchase?
There’s no wrong way to take on the early stages of the homebuying process. But before finding your new home, it’s important to get at least a loan pre-qualification. If you contact an agent before working with a lender to become pre-qualified, it’s likely your agent will ask you if you’re pre-qualified anyway. If you want to operate under realistic expectations throughout your homebuying journey, get pre-qualified for your home loan, then get pre-approved.
Pre-qualification is similar to a first interview with your lender. Pre-qualification helps you and your lender alike. Pre-qualification identifies credit eligibility, estimates the loan amount you’ll borrow and your monthly payments, and helps gather pertinent documents for the rest of the process. Pre-qualification also helps you compare loan rates and terms with a lender in a safe, non-binding way. Pre-qualification status also means your lender learns more about your homebuying goals, employment, assets and taxes, financial history and homeowner history.
It’s important to remember that pre-qualification includes a hard credit check, and so it’s important to have the best credit score possible to qualify for the loan program you wish to use. Lenders look to this when granting pre-qualification. For VA Loans, a general score to shoot for is 620, but other loan types such as USDA, VA and Conventional may have higher or lower score requirements. This is why pre-qualification is a great first step; it will help you further understand how your credit correlates to how much home you can afford, and helps you and your lender identify the best mortgage loan for your unique needs and financial situation.
So, how do you get pre-qualified? With Veterans United Home Loans, it’s as simple as filling out an online form.
Perhaps even more important than the pre-qualification process is the pre-approval process that follows. This process is more detailed than pre-qualification, and is when you provide documentation supporting your income, assets, and other financial information discussed at pre-qualification. Getting pre-approved shows sellers and real estate agents you’re serious about purchasing a home, helps cement the estimated numbers discussed during pre-qualification, and gives you a clear picture of what you can afford.
During the pre-approval process, your lender verifies your financial information and takes it as sound proof that you’re a strong candidate for a loan. Must-haves for pre-approval include good credit (talk to your lender if this is an issue), a stable source of income, assets and documentation of the aforementioned. Other documents and information you should bring to obtain pre-approval are your photo ID, pay stubs, bank statements, tax returns and military documents (such as a DD214).
Your Highland Homes new home specialist can provide you with a helpful checklist to help gather documents for your pre-approval. Once your lender verifies and approves of this information, you can move forward with your new home purchase with confidence. A pre-approved homebuyer also saves time when banks review finances later in the process. This will already be done through the pre-approval process! Additionally, lenders can help you estimate fees associated with the purchase of the home after you’re officially pre-approved.