Pre-qualify to purchase Real estate
As you set out to purchase your first home, have you ever wondered if you are eligible for a loan that will cover the house of your choice? Most first time buyers are unaware of the facts governing mortgage financing and hence get disappointed later as they find out that the house that they liked cannot be financed due to eligibility factors.
Pre-qualification is a process that educates you about your eligibility criteria. Most banks offer this help to ensure that you are not kept in the dark. It works on some basic principles and needs only some primary information to calculate an approximate eligibility value for an individual or family, in case of a joint application. It helps the individual very much as he starts looking for property that fall into his budget and hence saves him a lot of time and energy in the hunt for a new home.
The factors that they use to calculate the value of loan are:
Income details, employment status and bank balances to measure the financial stability.
Credit worthiness and any past issues like bankruptcy or foreclosures.
These help the banks in arriving at an approximate amount that the individual is eligible for. This entire process is quite simple and does not even require the individual to meet the bank officials in person. He can interact with them either over phone or through internet and furnish relevant information that will help the bank in reaching a conclusion. The bank either orally states a figure that the individual is eligible for or some times, issues a letter stating that under present conditions of employment and financial status, the individual is eligible for an approximate amount of home loan.
This pre-qualification procedure has acquired significance in recent times as it facilitates financing of homes, provided you approach the same bank that has issued you the letter. It also works as a good marketing tool for the bank to draw new customers. The biggest disadvantage in this case is that the figure given out during pre-qualification is only an approximate one and hence is not guaranteed. If found inadequate, the person desirous of availing the loan will either have to arrange for additional funds or start the process again.
This results in loss of time and sometimes even the short listed home can slip from his grasp.
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