Pre-qualifying for a mortgage is one of the first things you need to do when buying a house in New Mexico. Compared to pre-approval, pre-qualification does not have a direct impact on your actual chances of receiving a yes for your home loan request.
It is a casual agreement with a mortgage company in Albuquerque, Santa Fe, or Las Cruces about whether your credentials are good enough to borrow a certain amount of money for your property purchase.
Considering that it does not guarantee anything, should you bother to seek pre-qualification? Yes, the juice is worth the squeeze. Here are the reasons why:
Inquiring with Little Documentation
One of the benefits of pre-qualifying for a home loan is that you are not required to bring too many papers. You can provide your credentials without having to back them with valid proof, such as bank statement and tax documents.
Your lender will take your word for the income, employment history, outstanding debt, and assets you choose to disclose. Based on those pieces of information, the lender will provide you estimates for the loan amount and interest rate you can obtain.
Lying about your qualifications does not put you in trouble, but you are fooling nobody but yourself. At this point, your lender does not care what you say because none of it matters until your credentials are scrutinized more deeply.
Keeping Your Credit Score Intact
The beauty of pre-qualification is it does not include a hard pull, a credit inquiry that slightly brings down your credit score. You can obtain for your credit report yourself from a free source online, but it does not affect your credit standing. Only a lender-initiated credit inquiry will affect your credit.
Discovering Credit Issues
Getting ahold of your credit report allows you to find out inaccuracies, which you might not have found if you did not try to get pre-qualified for a mortgage. Fixing incorrect negative items increases your credit score quickly.
Learning About Different Mortgages
During pre-qualification, a lender can offer you the most suitable loans based on your disclosed credentials and needs. Although you do not have to commit to anything, it is good to know the exact financial products you can qualify for. Learning about them early can help you negotiate later when you move on to pre-approval.
Getting to Narrow Down Property Options Faster
While a loan amount estimate does not mean anything on paper, a pre-qualification letter can be used to make an offer with a seller. Also, it tells you which properties you can buy, so you do not have to waste your time and energy looking for houses that might be out of your budget.
Experiencing No Time Pressure
A pre-approval one has an expiration date, which usually lasts 60 to 90 days. Although you have the choice not to move forward with it, it can create a false sense of urgency that affects your judgment.
In contrary, a pre-qualification estimate is not a “take it or leave it” offer. It only serves as your guide as you explore properties on the market.
Despite its limitations, getting pre-qualified can help make the home-buying process much easier for you. Talk to a lender now, and provide accurate information about your credentials to get a reasonable ballpark estimate for a mortgage that makes sense for you.