Prequalifying Helps Determine How Much You Can Afford
Before you start house hunting in earnest, the real estate professional with whom you are working
likely will assist you in becoming "prequalified" to determine a price range you can afford. According to the
Rockford Area Association of REALTORS® (RAAR), prequalification is a necessary part of the home buying
process that helps save you time and money.
Your real estate agent may prequalify you, or he or she may ask you to go to a mortgage lender to get
prequalified.
When discussing prequalification, don't withhold information or be shy about your income or credit status.
By candidly discussing your financial situation, you'll give the agent the information necessary to show
you homes you can afford. By being prequalified, you can search for homes within your price range, and
your budget. This is the quickest path to home ownership.
Once you have signed a contract to purchase a home, you must choose a lending institution or mortgage
company from which to obtain your home loan. Your loan application will request financial data including
your place of employment, assets, and liabilities (including recurring debts such as credit card bills
and car payments).
Here are two important tips on loan qualification from the RAAR
- Do not borrow the down payment without disclosing the loan, submit fake letters-of-credit or gift letters, or make secret financial arrangements.
- Accurately list your income and assets, all debts and the approximate amounts you owe.
You'll most likely be charged a credit report fee by the lender, which will cover the cost of having your
credit history examined. Credit reporting agencies compile credit reports on consumers, including bill
payment history, as well as whether you have been sued or filed for bankruptcy among other information.
Federal credit reporting laws do not give you the right to inspect the actual credit report at the
reporting agency or to receive an exact duplicate of the report. But, you are entitled to a summary
containing the sources of the report's information.
If your ability to obtain a mortgage is adversely affected by the credit report, you have the right to
challenge its accuracy and seek corrections.
The credit report is part of the information the lender uses to determine if you qualify for a loan. It is
not a mechanism to prevent you from buying. Remember, lenders want to make loans, not turn them down.
