Mortgages & Creative Financing

The 5 Things to Know About Getting Pre-Qualified for a Home Loan

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Real Estate Investing Basics
49 Articles Written

In my work as a real estate agent, when I meet with new clients, I prepare them for three phases of home buying: the pre home search, the home search and, finally, being under contract. That initial pre-home-search conversation is important. It covers their goals, our relationship, expectations, and money. And by money, I mean what they have been pre-qualified for.

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Clients are pre-qualified by lenders based on their income and debt. Sometimes, clients reach out to lenders first and then find me, and sometimes they come to me first but haven’t yet spoken to a lender. That’s totally fine, but as a real estate agent, I’m limited in what I can help with until they talk to a lender. The good news is I have a handful of lenders I really trust, who move fast, and who can help get my clients qualified.

What is Pre-Qualifying?

The point of pre-qualification is to find out how much banks will lend you for a home purchase and at what rate. (This is why I need my clients to be pre-qualified first; setting up searches, etc. is difficult without knowing how much money we have to work with.)

What Information is Needed? What Kind of Questions Will I Be Asked?

Lenders need to know how much income you are taking in as well as what your debt looks like (student loans, car payments, credit cards, you name it, they want to know it.) And, yes, a credit report will be pulled. This information is then run through an automated system which determines whether or not you qualify—and for how much.

Related: The Comprehensive Guide for Financing Your Very First Real Estate Deal

How Long Does It Take?

It doesn’t take very long. You should have this number back the same day, and in some cases, within 15–20 minutes.

When Should I get Pre-Qualified?

Immediately. Even if you are just starting to toy with the idea of home buying, it’s really useful to have a lender tell you where you’re at financially and help guide your next steps (even if it’s six months to a year ahead of time). Better than anyone else, a lender will be able to tell you how to get your finances in line for a purchase.

What Else Should I Know?

Great question. There’s a couple other key things you should know:

  1. Get your house in order: In other words, if you have a spouse and you haven’t been totally candid about your finances with them, they’re about to find out. Better to have that talk privately than in front of the lender. Just know all financial ghosts will be coming out to haunt you.
  2. The credit report is good for four months. The pre-qualification is good for 30 days.
  3. Since your credit report is being pulled, try to limit it to one to two lenders for the pull.
  4. Getting pre-qualified is different from being pre-approved. Pre-qualification relies on the information you tell your lender; pre-qualification verifies all those facts. Pre-approval is better than pre-qualification in the housing market, so ask your lender and let them know if you want to go that far.

On a final note, having a lender you trust is as important as having an agent you trust. You should expect both of them to return your calls and emails quickly and answer your questions clearly and thoroughly. Having a local lender is often a huge advantage as well—unlike with national chains, they pick up the phone on weekends and after 5 p.m., and they often really go the extra mile to get your deal closed.

Related: Confessions of an Ex-Banker: How to Get Your Next Loan Approved, Guaranteed.

I know several great Denver-based lenders. If you are local and looking—or are ready to start your home buying or investment journey—let me know and I can get you with trusted professionals.

Can you think of anything I missed?

Share your tips and tricks of the trade below!

Erin Spradlin co-owns Erin and James Real Estate. She loves working with first-time homebuyers or sellers because it is fun to help people realize their dreams and loves working with investors because she's a fellow spreadsheet nerd. In addition to working with clients on buying and selling real estate, Erin Spradlin also runs Denver Women Invest, a monthly female investing group (email her if you want in!) and educational classes on Airbnb investing and buying or selling your first home. In keeping with many successful real estate investors, Erin and James Real Estate believes strongly in giving back to the community. For that reason, they donate a portion of their commission to a charity of their client's choosing on every single transaction.
    Christopher Cheng
    Replied over 2 years ago
    hi Erin, Thanks for this article. I am a foreigner who has invested in a single family property in the US. If the said property is fully paid and unencumbered, and now i would like to put the property up as collateral to secure some financing, can something like this be done? would the banks and mortgage lenders finance something like this? thanks, chris
    Kyrstin Szewczyk Investor from Seattle, Washingtin
    Replied over 2 years ago
    When you’re getting your credit pulled for your loan if you do it quickly (within 15 days) I believe it only counts as one credit check when you shop around for loans. If you remind me I’ll let you know though, ha, I’m about to get a second opinion from a lender this week so we’ll see!