Getting Prequalified

A prequalification or preapproval letter is a document from a lender stating that the lender is tentatively willing to lend to you, up to a certain loan amount. This document is based on certain assumptions and it is not a guaranteed loan offer, but it lets the seller know that you are serious and likely to be able to get approved for a mortgage loan. Sellers frequently require a prequalification or preapproval letter before accepting your offer to purchase a home.

When to get a prequalification?

Lenders typically check your credit before issuing a prequalification. For these reasons, many people wait to get a prequalification until they are ready to begin shopping seriously for a home. However, getting preapproved early in the process can be a good way to spot potential issues in time to correct them. When you’re ready, click here to get the ball rolling and to get connected with a few lenders who can prequalify you.

Find out what the lender’s preapproval process is

Every lender is different. Find out what you need to do and what documentation is required. Then follow up with the lender and provide any necessary information. And ask the lender what assumptions they made to issue the prequalification. Is there anything about your situation that could lead to your loan being denied later on, or that could increase your interest rate or loan costs?

Some lenders base prequalifications solely on the information you provide. Other lenders dig into the details with you now to make certain you have all the documentation you need and prevent delays and surprises later. Ask questions. All lenders will require documentation at some point if you decide to apply for a loan. It’s better to know now that you need an additional document (which could take some time to get) than when you’re about to close.

Getting a prequalification isn't the same thing as making a complete loan application

A prequalification just indicates that a lender is willing to lend to you – pending further confirmation of details. Once you make a complete loan application, the lender has confirmed your income, expense, asset, and other financial details, and has a better sense of your ability to qualify for a home loan.

There's no need to choose a lender in the prequalification stage

Getting preapproved is important because it helps you shop for a home. But at this stage, lenders aren’t in a position to give you enough information for you to make a decision about which lender offers the best deal. Getting a preapproval doesn’t commit you to using that lender for your loan.

Once you have completed the loan application process, lenders can now provide you with a “Loan Estimate,” which puts the lender on the hook for their estimated closing costs and fees. Once you have provided details to one lender, all the others are easy, as you already put this information together. This is a great way to get multiple offers so you can compare them side by side.