Mortgage and Auto Loan Prequalifications

The Usefulness of Loan Pre-qualifications

If you are thinking of looking for a new house or car, should you consider getting mortgage or auto loan prequalifications.

I think this makes a lot of sense from a couple of standpoints.

If you are worried about your credit worthiness or how much a bank will lend you, you can find this all out at your leisure and without the pressure of a mortgage contingency clause hanging over your head.

If you won't qualify for a loan, you will save the trouble of shopping for the car or house you want.

You will also find out about any problems you might face in getting a loan and have the opportunity to clear them up in advance.

Once the bank tells you how much money they will prequalify you for, you can figure out how much of it you can actually afford to borrow. So before you even go looking for your dream home or car, you know what price range to stick to.

The auto loan or mortgage prequalification can then be used as a bargaining chip in your negotiations with the home seller or auto dealer.

If you are a few thousand dollars apart on a home deal, disclosing the fact that you are only prequalified for a mortgage of “x” dollars (fib a little and hold some of you precommitted funds back) might clinch the deal for you.

Similarly if you tell the auto dealer you can have a check in his hands tomorrow for an amount a few hundred dollars under what he’s asking, you might have your new car.

Many sellers have a hard time resisting the bird in the hand and so are more willing to lower the price a bit knowing the funds are available.

Another way prequalifications will help you is by helping the seller make up his mind.

Most realty contracts gives the potential buyer up to 45 days to get a mortgage commitment. If you are competing with another buyer, the seller might be swayed by the fact that he doesn’t have to live through this period without knowing if he really has a deal or not.

So not only might he be willing to shave some money off the price, but he might also be more anxious to deal with someone who already has the financing prequalifications.

So the next time you want to make a major purchase consider getting yourself prequalifed.

How to Get Loan Prequalifications

Most lenders will give you a mortgage commitment for a certain amount subject to the real estate appraisal. Whether shopping online or with local lenders, explain you want a mortgage prequalification.

The lender will take it from there. Remember to consider all the terms and conditions of the mortgage offer and pick the one that is best for you.

You can follow the same procedure for a auto loan. If you know what kind of car you want, you can use that as the basis for a loan. Otherwise, the loan offer will be contingent on the value of the car you purchase.

If there is any question, make sure you know what value they will base the loan on for any given make and model of auto you are interested in.

  | Top | Mortgages | Home |