Before looking at homes, you should understand how to get qualified for a mortgage.

Knowing how much you qualify to borrow and what you can afford is important because without a mortgage, you won’t be able to buy a home, unless you have the cash.

Qualifying for a mortgage starts long before you buy a house.

First, you should get pre-qualified.

What is a Mortgage Pre-Qualification?

A mortgage pre-qualification is the first step all home buyers should take. You’ll want to do this 6 to 12 months before you’re ready to buy a home.

A pre-qualification isn’t binding. It’s a verbal approval of what you can afford based on the information you provide the lender.

Why bother?

A pre-qualification helps you understand how much you can afford. It also helps you determine if there’s anything you should change/fix before formally applying for a mortgage.

For example, if you have credit history issues or don’t have enough saved for a down payment to meet the mortgage program requirements, you have time to fix these types of issues before buying a home.

Each mortgage program has different down payment requirements.

How to Get Pre-Qualified

To get pre-qualified, you’ll tell your loan officer about your income, assets, estimated credit score, and current liabilities.

The lender may pull your credit with your authorization too.

  • Are you looking to buy or refinance a home?
  • What is your price range?
  • Do you currently own a home?
  • What type of property are you buying?
  • When are you planning to make your home purchase?
  • Have you (or your spouse) ever served in the US military?
  • Have you declared bankruptcy in the past 7 years?
  • Is this your first time purchasing a home?
  • What is your current credit score?
  • What is your email address?
  • What is your name?
  • What is your phone number?

The loan officer then uses this information to determine which loan program’s guidelines you meet and how much loan you can afford.

You don’t verify any of the information you provide, but make it as accurate as possible to ensure you get a fitting pre-qualification.

The pre-qualification process with Coole Home doesn’t affect your credit score.

How Far in Advance Should You Get Pre-Qualified for a Mortgage?

We always recommend that borrowers get pre-qualified at least 6 months before they look at homes. But, of course, if you are ready 12 months before, that’s even better.

Like we said earlier, this gives you time to fix any issues you might have that prevent you from getting the loan program or terms you want.

What is a Mortgage Pre-Approval?

A mortgage pre-approval is a step up from the pre-qualification. But, as the name suggests, it’s a preliminary approval.

We recommend you take this step when you’re ready to buy a home but BEFORE looking at homes.

Your pre-qualification was an estimate of what you can afford; the pre-approval is a written conditional approval based on your qualifying factors.

How to get Pre-Approved

To get pre-approved, you’ll complete a mortgage application, let the lender pull your credit, and you’ll provide qualifying documentation to verify everything stated on the mortgage application.

The documentation you must provide includes:

  • Paystubs proving your income for the last month
  • W-2s showing your income for the last two years
  • Tax returns showing your self-employment income for the last two years
  • Asset statements from the last two months proving your funds for the down payment and closing costs

Loan officers evaluate this information and determine if you’re eligible for a loan program.

If you meet the requirements, they’ll write a pre-approval letter that states how much you can borrow, the loan program, and the terms.

The pre-approval letter also includes the conditions you must clear to close the loan.

For example, all pre-approvals include conditions for a home appraisal and a clear title since you haven’t signed a purchase contract. Your pre-approval may also include other personal conditions you must clear if there were any questions during the pre-approval process.

What’s the Difference Between Mortgage Pre-Approval vs. Pre-Qualification?

A pre-qualification is an estimate of what you can afford. It doesn’t hold any weight, even with sellers or real estate agents.

You should do a pre-qual when you have an interest in buying a home but are not ready to do it for the next six to twelve months.

A pre-approval is best when you’re absolutely ready to buy a home.

The lender will provide you with a pre-approval letter stating how much you can borrow and on what terms. The letter is good for a few months, depending on the lender, so it’s best to do this when you’re ready to look at and bid on homes.

Sellers only allow pre-approved buyers to place bids on their homes.

This is because they don’t want to accept an offer from buyers without pre-approval. Buyers without pre-approval may not get the financing needed to close the deal.

Do Pre-Qualifications Affect Credit Score?

Getting pre-qualified typically doesn’t hurt your credit score. It’s a soft credit pull which means it’s not a pull to give you credit; it’s a pull to see if you qualify.

The qualifying process with Coole Home doesn’t affect your credit score, but double check with your lender. Every company is different.

When you’re ready to buy a home and apply for pre-approval, it will affect your credit. This is because, for pre-approval, lenders pull your credit with the intent to lend to you if you qualify.

Steps to Get Approved for a Mortgage

To get approved for a mortgage, use these simple steps:

  1. Prepare your finances. Make sure your job is stable; you have enough assets for the down payment and closing costs, and your debts are under control.
  • Get pre-qualified for a mortgage. Consider getting pre-qualified to see where you stand and if there’s anything you should fix before applying for a mortgage.
  • Get pre-approved for a mortgage. Once you’ve finalized your qualifying factors and are ready to buy a home, get pre-approved so you know what you can buy.
  • Finalize your closing. After finding a home, submit your purchase contract and final conditions. The lender will finalize your underwriting, clear the conditions, and get you to the closing table to close on your loan.

Final Thoughts

Knowing how to qualify for a mortgage when buying a home is important. An educated borrower is a less stressed and more successful borrower. The process is simple and starts with a pre-qualification before you look at homes.

When you’re ready and think your qualifications fit what lenders need, get the pre-approval and find the perfect home.

The process can go quickly once you find a home, so doing as much preparation ahead of time is key.

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