Pre-Qualification

Pre-qualification starts the loan process. Once a lender has gathered information about a borrower’s income and debts, a determination can be made as to how much the borrower can pay for a house or qualify for to refinance. Since different loan programs can cause different valuations a borrower should get pre-qualified for each loan type the borrower may qualify for.

In attempting to approve homebuyers and homeowners for the type and amount of mortgage they want, lenders look at two key factors. First, the borrower’s ability to repay the loan and, second, the borrower’s willingness to repay the loan.

Ability to repay the mortgage is verified by your current employment and total income. Generally speaking, lenders prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years.

The borrower’s willingness to repay is determined by examining how the property will be used. For instance, will you be living there or just renting it out? Willingness is also closely related to how you have fulfilled previous financial commitments, thus the emphasis on the Credit Report and/or your rental payment history.

It is important to remember that there are no rules carved in stone. Each applicant is handled on a case-by-case basis. So even if you come up a little short in one area, your stronger point could make up for the weak one. Mortgage companies couldn’t stay in business if they didn’t generate loan business, so it’s in everyone’s best interest to see that you qualify.