Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
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Getting Pre-qualified for a Mortgage Loan
What you'll learn: How to get pre-qualified and how pre-qualification differs from pre-approval.
EXPECTED READ TIME: 3 MINUTES
Published: January 26, 2024
If you’re beginning the homebuying journey, you should consider getting pre-qualified for your mortgage loan. While pre-qualification isn’t required, it can help you gain a better understanding of what you can afford and establishes a relationship with your chosen lender.
Many homebuyers, especially first-timers, don’t have the funds to purchase a home outright so a home loan will be necessary. A home loan pre-qualification can help streamline your homebuying process and can give borrowers an advantage over other buyers, especially in a competitive market. It shows sellers that you’re serious about buying. In this article, we’ll explore the pre-qualification process, how it can help you outline your budget, and more.
How pre-qualification can help you determine your budget
You can think of pre-qualification on a mortgage loan as a first step foot in your home loan journey. In order to get pre-qualified, you’ll have to supply some basic information about you and your finances. Lenders will check your credit score, income, and expenses to provide you with an estimate of how much you may be able to borrow. This will be a good indicator of your ability to later get fully approved for a mortgage.
The pre-qualification process
Pre-qualification for a mortgage loan is the first step of the homebuying process. In order to be pre-qualified by a lender, you’ll be asked to self-report the following information:
- Current employer and income
- Credit score (note: most lenders will run a soft credit check when you apply for pre-qualification)
- Current debts / monthly expenses
- Potential down payment amount
- Desired purchase price and mortgage amount
Based on the information you provide, lenders will assess your eligibility and you will receive a pre-qualification letter if approved. This document will outline the terms of the pre-qualification approval up to a specified loan amount. The letter will also typically state it is for informational purposes only and is based on self-reported financial details that have not yet been verified. Remember, getting pre-qualified is a fantastic first step, but you will not be final approved until the lender verifies all the financial information you provided, including information on the property you intend to purchase.
Using pre-qualification to negotiate with sellers
A pre-qualification for a mortgage loan is a great place to start your homebuying process as it showcases your creditworthiness to potential sellers during a mortgage negotiation. When it comes to making an actual offer on a home, though, many sellers and real estate agents may require the next level of documentation: a pre-approval letter.
Pre-qualification vs. pre-approval
In the mortgage industry, there is a clear distinction between mortgage pre-qualification versus pre-approval. They may look similar, but here are some of the key differences between the two:
|
Pre-Qualification |
Pre-Approval |
|---|---|
|
Your financial data is self-reported, aside from a soft credit check. (Does not impact your credit score.) |
Financial data will be verified, and a hard credit check will be conducted. |
|
A lender will provide an estimated loan amount to indicate what you may be able to borrow. |
Your chosen lender will provide the exact loan amount you are able to borrow. |
Getting pre-qualified is typically much faster than pre-approval as it is a less comprehensive process. However, it’s important to note that neither a pre-qualification nor a pre-approval letter 100% guarantees that you’ve secured a loan from a lender.
Why get pre-qualified for a mortgage?
While you may be tempted to skip the pre-qualification step, as the first step in your homebuying journey, it can help you shop for a home with confidence. Plus, once you have your pre-qualification letter in hand, it may help you focus your search on potential homes you can afford.
Though it’s only a first step in your home purchasing journey, getting pre-qualified for a mortgage is a good way to start.
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Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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