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Getting Pre-Qualified. Does it Work? Is it Worth it?

February 28, 2022 | Posted by: Marc Crossman

Getting prequalified is one of the first ways to find out how much mortgage you can afford. It is worth understanding exactly what a mortgage prequalification is, so here’s more.
What Is a Mortgage Prequalification?
A mortgage prequalification is a lender’s estimate that lets you know how much you can take out in a loan. It’s one of the first items you should add to your to-do list.
How It Works
Applying for a mortgage prequalification is surprisingly easy. Many banks and creditors provide online forms that take a few minutes to fill in and submit. You can expect an answer from the lender within a day or so.
It’s worth pointing out that applying for mortgage prequalification is considered a soft inquiry and will not impact your credit score.
Prequalification vs. Preapproval
Although mortgage prequalification and preapproval sound similar, the two processes have different requirements and implications.
A prequalification is an inquiry that tells you how much you can borrow, with no strings attached. Mortgage prequalification is not a guarantee that your loan will be approved or that you will be approved for the amount discussed throughout the process.
A mortgage preapproval involves a closer look at your creditworthiness. The paperwork requirements are different, and you will need to provide pay stubs, bank statements and tax records on top of meeting the lender’s credit score requirements.
Of note, a traditional mortgage preapproval counts as a hard inquiry, lowering your credit score by a few points, whereas mortgage prequalification does not.
Is a Mortgage Prequalification Worth It?
Absolutely! Mortgage prequalification will let you know whether you’re in a financial position to purchase real estate or whether you should postpone it a few years. Buying a home can be a stressful process, but if you can dedicate an afternoon to filling in a few forms, the peace of mind it provides is well worth the time invested.
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