So you’re getting ready to buy a home, and you want to take the right steps to ensure you get the home you want. What will it take to secure that house?
For the best shot, you need a pre-qualified mortgage loan letter.
In this article, we walk you through the mortgage application process and how to get pre-qualified with CIS Home Loans.
What Does Pre-Qualify Mean?
The first step in securing a mortgage loan is pre-qualification. This is an informal process where general information is collected by a mortgage professional about your assets, income and expenses. The information is used to estimate the loan amount you can afford and potential eligibility for approval.
This part of the application process gives you, the buyer, insight into the price range you can afford and shows whether you’re eligible for a mortgage loan. There is no credit analysis nor does it bring you any closer to securing the loan, but it does show the potential lender your eligibility.
CIS Home Loans has a free pre-qualification survey that can provide you with a pre-qualification letter.
What You’ll Need for Pre-Qualification
Before you even apply for a mortgage, we recommend checking your credit score and credit reports.
By knowing what your credit health looks like beforehand, you’ll have a better idea of what kinds of loans and interest rates you can qualify for. You’ll also have the opportunity to clean up your credit report before you apply so you can boost your credit score and lower potential mortgage rates. For tips to improve your credit score, check out our blog: How to Improve Your Credit Score to Lower Your Mortgage Rates.
Once you’ve become familiar with your credit and addressed any issues, you’re ready to apply for the mortgage loan and supply supporting documentation.
Here is your Pre-Qualification Checklist:
- Personal Information
- Phone Number
- Social Security Number
- Income Information
- Amount of Income
- Employer Name
- Length of employment
- Credit and Loan Information
- Permission to pull your credit information
- Whether or not you’re applying with a co-borrower
- Type of loan you’re interested in
Pre-qualification typically doesn’t take long – only a few hours, and at most a couple of days.
Once you’re pre-qualified, you’ll receive a pre-qualification letter and be ready to find and apply for pre-approval of a loan program.
CIS Home Loans lets you apply for a home loan online and guides you through the loan process. Check out this article for more information on our home loan process and timeline.
Pre-Qualification for Different Loan Types
While the above list gives you a general idea of the materials you need to pre-qualify for a loan, it doesn’t consider specialty loans for unique circumstances. Explore the different home loan types and what you need for pre-qualification below.
The Federal Housing Administration (FHA) provides home loans for people who need low down payment options to afford housing. FHA loans are an excellent option for low-income families or first-time buyers with a small amount in their savings. They’re also helpful for those who have experienced foreclosure or bankruptcy.
To pre-qualify for an FHA loan, you need:
- At least two years with one employer.
- Consistent or increasing income in the past two years.
- A credit report in good standing.
- Less than two thirty-day late payments in the past two years.
- Bankruptcy records, if applicable, that are at least two years old with good credit for two consecutive years.
- Foreclosure records, if applicable, that are at least three years old with good credit for the past three years.
When you pre-qualify for an FHA loan, your mortgage payment must be about 30% of your monthly gross income. Make sure you’re requesting a loan amount within your ability to pay. CIS Home Loans can help you pre-qualify for an FHA loan today.
The United States Department of Agriculture (USDA) provides 100% financing for primary homes on rural land. The main requirement for this loan is that your future home must be in a designated rural area. These may be closer to a city than you think.
To ensure you pre-qualify for a USDA loan, a lender will ask about the general information listed above — from your employment and income to the loan amount you want. Lenders will also ask about your assets and debts and request permission to perform a credit check.
You will need a credit score of at least 640, and your income must meet eligibility requirements based on the house’s area. You can apply for a USDA loan with CIS Home Loans today.
Veterans Affairs (VA) home loans are available to Retired Military and Active Duty members. Much like other pre-qualification processes, a lender will request basic employment and income information, along with a request for a hard credit inquiry.
The VA doesn’t create home loans. Instead, they provide insurance for borrowers. How to get pre-qualified for a VA loan will vary depending on the lender you go through. There’s no standard credit score requirement, but at CIS Home Loans, we offer VA loans for credit scores as low as 580.
Why You Need to Get Pre-Qualified
When you’re ready to make an offer on a home, you’ll be expected to provide documentation. A pre-qualification letter lets the seller, agent and lender know you are serious and that you have both the credit and the income to back up your purchase. Pre-qualification also gives you an idea of what your loan arrangement will look like.
Remember, the housing market is competitive. Sellers prefer a pre-qualified buyer over one who doesn’t have the official paperwork that proves they can close a deal.
Pre-Approval vs. Pre-Qualify
Pre-qualifying for a loan is an early step in the loan process. Pre-approval typically follows the pre-qualifying, and it’s a much more involved stage in the application. While pre-qualification gives you an idea of your creditworthiness and how much your loan might be worth, pre-approval is a definitive statement.
To get pre-approved, you have to fill out an official mortgage application, and you’ll undergo an extensive financial background check. Once a lender has assessed your financial abilities, you’ll earn pre-approval for a certain amount. During this process, your lender may let you lock in an interest rate to give you more certainty about the money you’ll owe.
Getting pre-approved moves you one step closer to getting a loan, putting you ahead of other buyers when you’re looking for a house. While pre-approval may give you an advantage in the housing market, pre-qualification is a necessity when you’re trying to buy a home.
Pre-Qualify with CIS Home Loans
You need to get pre-qualified before you can apply for a home loan. To get pre-qualified for a loan with CIS Home Loans, just fill out this form!