If you’ve ever purchased a house, I’m sure you’d agree that there can be nothing more frustrating than applying for the mortgage. Which is why we encourage prospective owners to always begin their house hunting with a prequalified mortgage letter! The prequalification letter helps you decide on the amount you can afford. If you’ve ever wanted to apply for one, but didn’t know how to, read further:
This is a letter from the bank stating that they are willing to lend you a certain amount based on certain assumptions like debt, income and assets, etc. This is different from a pre-approved letter wherein the bank will tell you the specific amount for which you are approved and the interest rates for the same.
The bank looks into several factors to decide on the prequalified quote. Some of these include income, debts, credit history, savings, etc. Lenders consider the nature of your job, stability factors, the length of your employment, etc. to ensure that you can afford enough to spend on living expenses after paying the installment. The bank also analyses the debt you owe, including recurring bills, alimony costs, etc.
A prequalified quote gives you a reasonable target within which you have to shop around when looking for houses. This way, you’ll remember to stay within your means and set realistic expectations.
No, prequalified letters do know guarantee a loan, and neither are you promised a certain rate of interest. You may be required to present additional information like income, asset verification, etc.
As earlier said, prequalification helps to set a realistic expectation when house –shopping. It also helps banks to differentiate between a serious shopping and those that are there just for shopping around.
From your credit rating to bank ids, you will be required to submit a few documents for a prequalification letter. Speak to a mortgage broker to help you get the prequalification letter.
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