Prequalification and preapproval are the first steps toward your USDA Home Loan. In these steps, a homebuyer will determine if they are eligible to use a USDA loan, gain an understanding of their home purchasing power and uncover any red flags that may prevent them from receiving a USDA loan.
Prequalification is the first step toward a USDA loan. Prequalification provides homebuyers with a general sense of how much they can afford and red flags that may hold them back from receiving a USDA loan.
In this stage, your lender will get to know your financial situation to determine purchasing power. Questions vary by lender, but be prepared to answer questions on:
Most lenders will also request your permission to perform a hard credit inquiry to determine your current mortgage credit scores.
You can begin to determine your afford ability with this USDA loan calculator.
While USDA loan prequalification is based off estimates, preapproval deals with the actual documents and exact figures. Once preapproved, you know exactly how much of a home you can afford and home sellers have additional confidence in any offer you place.
During USDA loan preapproval, your loan officer will verify all information given in prequalification. Common documents you may need to furnish include:
Once you have been preapproved for a USDA loan, you are well on your way to becoming a homeowner; however, it is important to remember that being preapproved does not guarantee a home loan. There are usually conditions that follow preapproval, which must be met for your underwriter to approve your USDA loan.