One of the most frustrating situations to run into when house hunting is to find the
perfect place, negotiate an offer everybody's happy with - and then not be able to qualify
for the needed financing. The best way to avoid this is to pre-qualify for a mortgage
through a lender before you even start looking at houses - so you're fully confident about
what you can afford.
Use a lender
Prequalification through a lender doesn't have to commit you to finance your home through
that same lender. Indeed, if anything it's simply a chance for the lending company to
market its services. If you want, you can continue to shop for the best mortgage deal
while you're house hunting. Your real estate agent can provide you the names of reputable
lenders and set up a prequalification meeting.
Even after you're prequalified, it's worth moving forward with the loan application
process as early in your house hunting as possible. The process can be lengthy, with
lenders requesting highly detailed information about your debts, assets and credit
history. By starting early, everything can be in place when you find the right home.
Sellers know you're serious
In addition to clearly letting you know how much home you can afford, prequalifying lets
home sellers know how serious you are. One of the first concerns a seller or listing agent
has when an offer is submitted is: "Has the buyer been prequalified?"
When it's a seller's market with multiple offers and quick sales, prequalification
through a lender is vital. And regardless of market conditions, prequalification always
increases a buyer's standing in comparison to buyers who aren't prequalified. Sellers
don't like having a property tied up in negotiations - only to have the transaction
disintegrate in the 11th hour because the buyers don't qualify for the necessary
If you're not ready to talk to an agent or lender, you can prequalify yourself using the
same basic formulas used by the mortgage industry. This will give you a good idea of your
price range. But when it's time for serious shopping, it's worth knowing exactly what a
lender thinks. And it's worth confirming that your credit history doesn't hold any
surprises. An experienced real estate agent can help you through this process.