While a pre-qualification isn't quite the same as getting a mortgage pre-approval, it is an important part of the home buying process. You'll definitely want to consider getting pre-qualified prior to getting started on your home buying journey - and here are a few reasons why.
1. It Will Help You Get Your Budget Bearings
The idea behind getting a mortgage pre-qualification is it gives you a rough idea of what you'll be able to afford. This way, you'll have an basic understanding of how much you'll need to save and you can establish a budget for your new home.
2. It Doesn't Cost Anything
As mentioned above, a pre-qualification is a preliminary step to getting a pre-approval. It's an estimated loan amount given to you based on a high-level glance at your finances. Lenders also want you to come back to them for your official pre-approval later on and, for these reasons, your pre-qualification shouldn't cost you anything.
3. It Doesn’t Require a Credit Check
This can be of added benefit to those still working to improve their credit scores before committing. Unlike a pre-approval which requires a credit check, a pre-qualification will offer many of the same benefits without affecting your credit report.
4. It Saves You Time
Imagine all the time you'll save by looking at beautiful new homes that are actually in your price range (as opposed to spending countless hours looking at more expensive models you can't afford). What's more, you've already become familiarized with a lender so you may have an easier time getting pre-approved - especially if you choose to work with the builder's preferred lender.
5. It Lets You Do Some Research
You don’t have to choose the lender you pre-qualify with. You can shop around and gauge your experience on who you want to work with. After all, mortgages are a long term thing and you're going to want a lender offering the best rate as well as the best service.
6. No Commitment Required
We said it above, but it bears repeating. You don't have to commit to anything. Unlike a pre-approval, you can get a pre-qualification and then decide the estimated amount doesn’t work for you. This gives you a chance to re-evaluate your finances and approach a different lender (if you so choose) later on.
7. It Helps You Plan Ahead
Once you have an idea of how much a lender may be willing to approve you for, you can prepare for any added expenses that come with being a new home buyer. This can include upgrades, closing costs, moving costs, and new furnishings.
8. Sense of Security
Lastly, and maybe most important, getting pre-qualified will give you peace of mind knowing where you stand in terms of meeting lender requirements. This can give you the confidence to start looking at homes, which is, of course, what the buying process is all about!
In short, getting pre-qualified is a great first step on the road to obtaining a great mortgage - be sure to take this into account when looking for your dream home.