6 Steps for Pre-Loan Qualification

6 Steps for Pre-Loan Qualification

Are you looking to buy a home? Before you even start looking, you should get yourself pre-qualified for a mortgage. Pre-loan qualification tells you what the bank is willing to lend you, which means you have a solid idea of your budget. It doesn't guarantee that you will get the loan, but it gives you a much better idea of how much house you can afford.

So, what should you do to get pre-qualified? Here are some of the steps to help get you there.

1. Check Your Credit

Do you know what your credit score is? Many people don't. You can get a free annual report from the three national credit score bureaus – Equifax, Experian, and TransUnion. There are other ways, too. Some credit card companies give you your credit score regularly with your statement.

The better your credit score, the more likely you are to get the loan you want on reasonable terms. A score between 670 and 739 is considered good, 740 to 799 very good, and 800 and up excellent. If your credit score is below 670, you might want to take steps to improve it, such as paying off credit cards, before trying to get a mortgage.

2. Work Out Your Debt-To-Income Ratio

Your debt-to-income ratio is the percentage of your gross monthly income that goes toward debt payments. Lenders prefer this number to be 36% or below including your new mortgage. Paying off as much debt as possible can help you get a higher loan amount.

This is also a good way to work out what monthly payments you can actually afford before you start shopping for a home. Sometimes a lender will pre-qualify you for more than you are actually comfortable spending.

3. Chose a Lender

Choose a lender you can trust. It's often a good idea to talk to multiple lenders, but the most important thing is to find a trustworthy lender with a good reputation. Going through a good mortgage broker such as LendSmart is a great way to find the right lender and get yourself pre-qualified.

4. Get Your Paperwork Together

While pre-qualification does not require as much paperwork as pre-approval, you may still be asked to show proof of income and other paperwork to demonstrate what you can afford.

You will need this paperwork eventually anyway, so make sure that you have W-2s, documentation of assets, tax returns if self-employed, etc, ready to show your lender. At some point you will want to select a lender and go from pre-qualification (an estimate) to pre-approval (where they are making you a maximum loan offer).

5. Complete the Application Process

Many lenders now allow you to complete the application process online, and this is also likely if you are working with a broker. Make sure to double check everything on the forms you send in. Inaccurate information can cause a problem when you move from pre-qualification to pre-approval and discover that the estimate is too high. Check for typos.

Always be honest. Lenders limit what they will loan for a reason. It's not in their interest to lend you more than you can repay.

6. Get the Pre-Qualification Letter

Once you get the pre-qualification letter or letters you can use those numbers to guide your home search. You will want to apply for full pre-approval once you have selected a lender (don't necessarily go with the one who offers you the most money), but before you start making offers. However, you can use the pre-qualification letter to set search parameters or tell your real estate agent what your hard limits are.


Once you are pre-qualified you can start your home search. Just bear in mind that the amount is an estimate and not guaranteed. Feel free to contact us at Lend Smart Mortgage to learn more about the pre-approval process and discover how we can help you get your next home mortgage.

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