Prequalification can be done in as little as 15 minutes. The more complex a buyer’s income and credit history, the longer a prequalification can take.
Prequalifications will review income, credit, and assets for all borrowers on the home purchase.
Each of the major loan types (Conventional, FHA, VA, USDA, and Jumbo) have different credit requirements. FHA and VA are the most lenient. FHA can go as low as a 580 credit score. VA technically does not have a score minimum, but the banks that offer VA loans usually impose one and this can vary bank to bank but also is common around 580.
When more than one person is buying a home together the lender will combine incomes, debts, and assets of all borrowers. They will also use the lowest scoring borrower’s credit. You cannot use one borrower’s income without also considering their debts and credit score.
Prequalification is performed by a loan originator, sometimes called a loan officer or LO for short. LO’s will take an application and review your unique scenario to see which, if any, loan box you fit into best along with determining what amount you qualify for.
The amount you can afford is determined by the percent of your income that goes towards your house and other monthly debts that show up on a credit report. Each loan type is a little different, but most will allow you to use a little less than half of your gross monthly income towards your house payment and other monthly debts.
The common misconception is you need 20% down payment to buy a home. The reality is you can buy with a very little amount of your own funds for a home. Conventional loans only require 3% of the home price to come from the buyer, and FHA loans only require 3.5%, and that can come from a gift or down payment assistance program.
Generally, a prequalification will last until something major changes in one of three main areas: Income, Assets, and Credit Score. As long as these stay the same or improve, the prequalification is typically still good.
Documents, credit reports, and verifications the lender obtains do expire and need refreshed if they’re older than 90 days. So if it’s been a while and you’re looking to put in offers, reach out to your loan originator and ask what they need to refresh your prequalification.
Contact us below and we’ll send you the first steps.
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