The current fixed mortgage rates in Maryland are 7.00% for 30-year loans and 6.38% for 15-year loans, on average. While this represents a slight decline compared to earlier in the year, Maryland remains a seller’s market, similar to much of the country. High prices highlight the importance of getting pre-qualified for mortgages in Maryland. This requires knowledge of the pre-qualification process and how homeowners can progress to approval.
New homeowners can follow these steps to get pre-qualified for their home loan and choose the type that makes the most sense.
Improve Your Credit Score
The pre-qualification process provides mortgage lenders an initial assessment of their borrower’s finances. It differs from pre-approval in that pre-qualification is less official, serving more as a way to gather information than make a final decision on the borrower’s eligibility.
Homeowners can prepare for pre-qualification by checking their credit scores, which is likely the first step lenders will take to assess their financial situation. Credit scores give lenders a snapshot of your finances telling them how trustworthy you are as a borrower.
Checking your credit score is an easy way to learn your eligibility for mortgage loans in Maryland. The three major reporting bureaus, Experian, Equifax, and TransUnion, provide a free credit report each year that homeowners can use to their advantage.
Consider these simple ways that any homeowner can improve their credit scores:
- Pay back loans on time
- Eliminate open lines of credit
- Pay down balances
- Keep accounts with more history
- Maintain assorted lines of credit
- Refrain from opening new accounts
- Establish account reporting accuracy
- Get authorized on someone else’s credit
How credit scores impact eligibility differs between lenders, but 720 is considered the benchmark credit score for mortgage loan eligibility. Credit scores below that can lead to denied applications and higher interest rates, so homeowners should try to improve their scores before applying for a loan.
Collect Documentation
Mortgage lenders require extensive financial documentation to approve new borrowers. While pre-qualification is not as official as pre-approval, every homeowner should plan ahead by gathering these important documents during the pre-qualification phase:
- Tax Returns
- Social Security Card
- Driver’s license/photo ID
- Bank statements
- Investment account statements
- Previous mortgage statements
- W-2 forms and pay stubs
Lenders require this financial and identifying information for pre-approval. However, assembling these documents even earlier expedites the pre-qualification process. It demonstrates to lenders that you will be a trustworthy investment.
Assemble Proof of Assets
Lenders request proof of assets during pre-qualification to assess potential borrowers’ ability to repay their mortgage. The documents requested may differ depending on the lender. Still, most request retirement and investment assets, including IRAs, CDs, stocks, mutual funds, 401(k)s, and other retirement accounts, to get an accurate financial snapshot.
The asset reporting process will become more detailed during pre-approval, expanding to include non-liquid assets such as properties, vehicles, and high-value personal property. Self-employed individuals and business owners will likely need to report the value of their business assets as well.
During pre-qualification, the proof of assets will likely be a short process. To prepare for pre-approval and make sure everything is accounted for, homeowners can assemble this information to give lenders a more complete financial picture during the initial assessment.
Comprehend the Results
Pre-qualification for a specific mortgage amount helps homeowners receive official pre-approval and eventual loan approval. Sometimes, that approval comes with conditions, but the likelihood of being denied a loan or suspended from reapplying goes down with a more successful pre-qualification process.
However, new homeowners should know pre-qualification is not a promise of approval for that mortgage amount. Pre-qualification, which is usually a quick process, sometimes as brief as a few minutes, only estimates a homeowner's likely eligibility for a particular mortgage amount.
While a pre-qualification letter is the first step toward home ownership, a pre-approval letter is a far more decisive indication of the borrower’s actual eligibility status. Pre-approval can only be finalized after a property has been selected, demonstrating the importance of successful pre-qualification as a financial baseline for the lender to use during the rest of the process.
Contact Woodsboro Bank to Get Pre-Qualified for a Home Mortgage in Maryland
If you plan on buying a home in Maryland, it’s essential to understand the pre-qualification process. This includes assembling the needed documentation, improving your credit score, and creating accurate proof of assets. At Woodsboro Bank, we offer members of our community a personalized mortgage qualification process that focuses on each client’s needs.
In a seller’s market, receiving fair home mortgage rates is essential to planning your financial future. Contact Woodsboro Bank today to learn how we help Maryland homeowners afford their homes with an efficient and fair pre-qualification process.