Before you begin shopping for a new home, you should talk to a HomeQuest Mortgage Loan Originator, so you can figure out how much house you can afford. This will put you in a better position as a buyer in the marketplace. It is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
PRE-QUALIFICATION: A mortgage pre-qualification is simply an estimate of how much house you can afford and how much money a Lender would be willing to loan you. The best time to get a pre-qualification letter is right at the beginning of your home buying process, before you even start looking at houses. This involves contacting a HomeQuest Loan Originator and providing information on your income, assets, debts/liabilities and potential down payment amount. The Mortgage Loan Originator will then provide you with a ballpark figure in writing of how much he/she thinks you could afford to pay for a monthly mortgage payment. There is $0 cost involved and there is no commitment on either side. This estimate is just helpful in determining if buying a home is a viable option for you.
Loan pre-qualification does not include an analysis of your credit report or an in depth look at your ability to purchase a home. Because it is a quick procedure, and based only on the information you provide to the Loan Originator, your pre-qualified amount is not a sure thing; it's just the amount for which you might expect to be approved. For this reason, a pre-qualified buyer doesn't carry the same weight as a pre-approved buyer who has been more thoroughly investigated.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
PRE-APPROVAL: To get pre-approved, you will complete an official 1003 mortgage application and supply your HomeQuest Loan Originator with the required documentation necessary to perform an extensive examination of your financial background and current credit rating. (Typically at this stage, you will not have found a house yet, so any reference to "subject property" will be left blank on the 1003 application). You will need to provide various documentation validating your income, employment history, assets and cash reserves; documents such as W-2 forms, recent pay-stubs, bank statements, federal tax returns and credit card statements. We will review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
It is important to understand, however, that even a pre-approval is not a gaurantee that you will be approved for a mortgage loan. The funding will only be given when the appraisal, title search, and other verifications (VOE) are satisfied. The pre-approval is not binding; you can still obtain a mortgage from a different lender. If your financial situation changes (e.g. you lose your job, interest rates rise or a specified expiration date passes), your lender must review your situation and recalculate your payment and debt-to-income ratios accordingly.