What Your Need to Know About Mortgage Prequalification

If you’re thinking about buying a home, getting prequalified for a mortgage can be a helpful first step. Prequalification gives you an estimate of how much you may be able to borrow and can help you set a realistic budget before you begin your home search.

What is a Mortgage Prequalification?

Mortgage prequalification provides an estimate of the loan amount you may qualify for based on financial information you provide to a lender. This may include your income, debts, assets and other financial details.

Prequalification is not a loan approval or guarantee of financing, but it can give you a better idea of your potential buying power.

Why Get Prequalified? 

Getting prequalified before shopping for a home can help you:

• Better understand your price range
• Estimate potential monthly mortgage payments
• Identify financing options that may fit your needs
• Show sellers and real estate agents that you’ve started the financing process

It can also give you an opportunity to discuss your financial situation with a mortgage lender and address questions early in the homebuying process.

Prequalification vs. Preapproval 

Although the terms are sometimes used interchangeably, prequalification and preapproval can involve different levels of financial review. Prequalification is generally an initial estimate based on information you provide, while preapproval may require additional documentation and verification.

Your mortgage lender can explain the process and help determine which option is appropriate for your homebuying journey.