Prequalify for a Home Loan Before You Start Home Shopping

Why get pre-qualified by a lender before looking for your next home? Based on my first hand experience with clients, I have found several compelling reasons for home buyers to get pre-qualified for a loan.

1) You’ll uncover credit problems.

In the ideal world, you’d contact your lender 6-9 months in advance to see what issues on your credit will need to be resolved. If you have any errors that may have caused a negative credit score or that disqualify you from the prime lending rates, you’ll have an opportunity to fix them before you need to get a home loan. I’ve had first time home buyers with practically no credit discover that their lack of borrowing can actually hurt their ability to get a loan at a good rate. I’ve advised them to get a credit card or a car loan and make sure it is paid on time every month.

2) You’ll know how much house you can afford.

Nothing is more difficult for a home buyer than to start looking for a larger or nicer home and find out later that the payments for that home will be too high. Once you have to downsize your price range, it is difficult to downsize your expectations as well. That is why good real estate agents only show you homes in your price range, and you can help by determining what that price range is by getting pre-qualified for a home loan.

3) Prequalification may be required when you purchase a home.

In the state in which I work, Arizona, real estate agents are required to submit a prequalification form, signed by the lender, with the purchase contract. In addition, a pre-qualified buyer is a strong buyer in the seller’s eyes, and that matters when it comes to markets where multiple buyers are bidding for the same property, or you want to present a low offer on a home.

Liz Suto is a professional writer, North Phoenix real estate agent and Anthem Arizona resident.