The Dangers of Trying to Prequalify Yourself
Sometimes the term ‘prequalify’ is used incorrectly in the mortgage world. It can be a bit disconcerting, especially with multiple non-lender sites that ‘prequalify’ someone without even speaking with an experienced loan officer. Trying to fly solo in this area can mean someone who in fact can qualify for a home loan could be told by an online ‘bot’ that they can’t qualify. I can give you a pre-qualification over the phone with a quick and easy conversation. I’ll also explain the big differences between a pre-qualification and a pre-approval, and why a pre-approval letter can help you close faster.
Shopping Online to Get Prequalified: Does it Work?
Let’s say that a couple have been thinking about buying a home in the current market but would like to know how much they might qualify for. Maybe they’re just curious and not yet serious enough to submit an application. They just want to get a general idea. So, they find one of these ‘do it yourself’ sites and input their basic information. They’re asked to list how much money they make each month. They do so but here’s what can happen all too often…they use their ‘take-home’ pay instead of their gross monthly income. That’s completely understandable. But lenders don’t use take-home pay when qualifying. They use gross monthly income, which is different. VA loans do take into consideration the amounts of money left over each month, called residual income, but that’s unique to VA loans.
So, they put in their take-home income information and the auto-response tells them they can only qualify for $200,000 but the houses in the area they want to look at are much more expensive. Disappointed, they quit the process entirely, thinking that for the foreseeable future they’re going to continue to rent. They made a mistake and it cost them. One of the contributing factors in qualification is interest rates, we all know that. But with interest rates still at record lows, it’s quite possible that in the near future rates begin an upward trek. So much higher that the amount they can qualify begins to shrink. Again, using this example, they used the information which lowered what they might qualify for and as rates begin to rise, they’re impacted twice as much. The good news is it doesn’t have to be that way.
How to Prequalify: Knowing Your Loan Options
Another issue might be simply choosing the wrong loan. Again, there are so many loan choices, but they did some research on their own and found out that at 15 year loan term was favorable over a 30 year term. So, they pick a 15 year term when filling out all the fields online. A 15 year term compared to a 30 year term means the 15 year monthly payment is almost twice as high as a 30 year. They probably don’t know that, but had they spoken with an experienced loan officer, they would have made the right choice. Maybe even a 20 or 25 year term would work better in their favor. But again, they didn’t know.
It’s certainly understandable that someone who is just curious to want to avoid speaking with a loan officer at such an early stage. Maybe they think they’re wasting a loan officer’s time if they’re not 100% committed to apply for a mortgage. Maybe they think they’ll soon be barraged with emails and phone calls from multiple loan officers who pay to appear on so-called “aggregator” sites. Which, in many cases, that would be true.
But in either instance, not knowing at all and making a decision without the benefit of an experienced loan officer, can keep someone who can qualify for the home they want.
Find Out How Much You Qualify For Today
Some things are better ‘flying solo’ but in the mortgage prequalifying arena that’s certainly not the case. If this is you and you’re just ‘sticking your toe in the water’ know that I help people every day who are just curious. Whether it’s to buy the home they want or wondering whether or not refinancing makes sense, it’s time to talk to a professional. It’s time to contact me directly and I can provide the critical information you need.
