Get Pre-Qualified for a Mortgage

Published On: June 8, 2010

This is not the same as getting pre-approved for a loan. Your're not making a commitment to a specific lender, nor is the lender committed to loaning you this amount. The pre-qualification letter is simply an estimate of how much money you're likely to be approved to borrow, based on the financial information you've provided. It's a pretty informal process.

WHERE. You can get pre-qualified for a mortgage at your bank, if it offers mortgages, or at another financial institution or mortgage lender's office - either by phone or in person.

HOW. A loan officer will typically ask you about your income, your assets (such as how much you have in the bank and investments), your debt, and the down payment you plan to make in order to figure out how much you qualify to borrow. The process usually takes a few minutes and shouldn't cost you anything.

WHY. It can save you a lot of stress by giving you a realistic estimate of the maximum amount you'll likely be able to borrow. You can use a Mortgage Calculator to figure out about how much your monthly mortgage payments would be, given the amount you've pre-qualified for.

Before you decide if you're ready to buy and how much you can afford, remember this checklist:

• 10 to 20% down payment
• Closing costs equal to 3 to 5% of the pruchase price
• A 6 to 9 month emergency savings fund to cover basic expenses if you (or your spouse) lose a job
• Other houseing expenses beyond the mortgage (including Private Mortgage Insurance, homeowner's insurance, taxes and common or maintenance charges)
• Spend no more than 41% of your monthly pre-tax income on all your housing costs and any debt or other big payments (like childcare)
• Get your credit report and score; have any errors fixed; pay down your debts; and give yourself a few months to see the results in your score
• Gather your financial info and find out how much you're pre-qualified to borrow