Nadel & Ciarlo, P.C.

What does your pre-qualified mortgage mean?

You want to buy a home or apartment in New York, and so you reach out to a mortgage lender. They ask you for some information, you provide it, and then they tell you that you are pre-qualified for a certain amount of money. What does this really mean?

The biggest pitfall here is that people -- especially first-time homebuyers -- often assume that they are guaranteed that much money. They cannot believe how fast and easy it was, but they think that's what they can spend.

It's not. There is no guarantee. This is just what the mortgage lender thinks you'll get, allowing you to start your home search. If you get farther into the process, they'll consider your case more carefully and tell you what they'll really offer you. The pre-qualification is just a ballpark number so that you can compare options, explore the real estate market, and possibly make an offer.

Why does it work this way? The biggest reason is that the lender hasn't actually verified the information you gave them yet. It's all consumer-supplied data. If you're honest, they can give you an idea about a potential loan, but it's one thing to claim you make $500,000 per year and quite another to prove it. They're not going to actually give you a loan until they are sure of what you can afford, and that takes more digging on their end.

It's important not to make any major financial mistakes when buying a house, and you need to know exactly how the process works and what you need to do every step of the way.

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