Prequalification Letter
Information: How Do You Know if You're a Qualified
Homebuyer?
Lots of books and articles aimed at homebuyers tell you
that you can gain an edge during a competitive real
estate market by getting prequalified before you begin
your search. That may be true, but how do you find out
if you're a "qualified" homebuyer? There are several
relatively easy and inexpensive ways to find out if
you're qualified for a home loan, and how much of a loan
you can qualify for.
First, you'll need to be able to prove that you have
verifiable employment and a good income. Then you'll
need to demonstrate that you have good credit.
Proving that you have a job and verifying income is
relatively easy, but proving your creditworthiness is a
bit more difficult, because it involves providing
lenders with your FICO score. FICO is an acronym for
Fair Isaac Corporation, which is a company that computes
the credit ratings that are the industry standard by
which lenders determine a borrower's credit history--and
their potential to repay a mortgage, based on that
history.
For a fee, you can order your credit reports from all
three credit reporting companies (Experian, TransUnion,
and Equifax) and your credit score. It may be well worth
your while to examine and compare each of those reports,
because they will contain somewhat different
information, and some of it may be incorrect.
However,
the credit score you pay for is not the same one your
mortgage lender will see. The best way to get your true
credit score is to find a loan officer you trust and
have him/her run your credit for you.
You can also obtain all three credit reports once a year
at no cost (which is a good idea, even if you're not
planning to buy a home, by the way) by visiting
www.annualcreditreport.com or by calling 1-877-322-8228.
However, you won't receive your credit score, which is
really the number that's most important to lenders.
You can go
to the lender of your choice and work with them to
negotiate the best terms, interest rate, and amount of
money you can borrow. Your lender will be happy to work with you to
make your dream of buying a home a reality.
Once you've established the guidelines for your home
loan qualification, ask for a "preapproval letter." It
lets sellers and their agents know that you've already
gone through the process of qualifying for a loan, which
means the sale will go through more quickly, which is
always a good thing in the minds of sellers. A
"preapproved" letter counts more than a "prequalified"
letter.
It can take time, but finding out how much you're
qualified to borrow can help narrow your home search and
give you a competitive advantage when it comes to buying
your new home. You may be surprised at your financing
options!
Copyright © 2006 Jeanette J.
Fisher
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Jeanette
Fisher teaches how to get out from under credit card debt,
how to use credit to make money, and six ways to
build strong credit to finance your first home and
multiple investment properties. For a free credit
advice and free ebook "Credit Tips for Mortgage
Financing," see
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