Last month, we talked about the first step in the modular home-buying process (research). But after you do your homework and decide to purchase a modular home, the next step is pre-qualifying for a home loan.

Loan pre-qualification is important, especially early in the modular home shopping process, because it’ll give you an indication of how much money you’re qualified to borrow and how much you can spend on your new home. Of course, loan pre-qualification does not guarantee that you’ll get a loan. The actual mortgage process comes later and is a little more detailed.

For the first step in loan pre-qualification, you’ll need to find a reputable lender or mortgage broker. Start by asking friends, family or co-workers for recommendations. If you already have a relationship with a real estate broker, they should also be able to help you.

Remember, when you’re finally ready to take out your home loan, you don’t have to use the same lender that pre-qualified you. The pre-qualification process is based on your personal information and uses standard lending formulas and guidelines. No matter which lender you ultimately choose, your pre-qualified amount should stay roughly the same. When selecting your lender, experience in financing modular homes should be a factor in your decision. 

After you’ve identified a lender, the pre-qualification can begin. It’s a simple process that compares your income to your debts (car payments, credit card debts, other mortgages) to determine your debt-to-income ratio. A lower ratio (less debt, more income) means you can borrow more money for your new home. During the pre-qualification process, the lender can also check your credit score. (Stop back for more information on credit in an upcoming blog entry.)

Armed with all of this information, the lender will be able to pre-qualify you for a loan and give you a letter of pre-qualification. With this letter, you will know how much you can spend on your modular home. The pre-qualification process will also give you an idea of how much your monthly mortgage payments will be.

The next installment of The Modular Process (Step 3): Meeting with a modular home builder.