“The future belongs to those who prepare for it.” -Ralph Waldo Emerson

How to prepare to buy a home by getting pre-qualified and/or pre-approved.

It’s a competitive market out there! There are ways a wise consumer can better position themselves in the race to secure the home of their dreams. Few Realtors will argue that beginning with the knowledge of your financial position is the optimal place to start.

By contacting a bank or lender and providing them with a preliminary overview of your financial standings, including your debt, income and assets, they can evaluate this information and give you an idea of the mortgage amount for which you qualify. Pre-qualification can be done over the phone or on the internet. A loan pre-qualification is a preliminary review of your ability to purchase a home; a credit report is not typically run at this time.  Getting pre-qualified is a fairly simple process and will insure a buyer that they are shopping down the right aisle when going out to shop. At this point, a lender can explain your various mortgage options and recommend the type that might be best suited to your situation.

It is important for a buyer to understand that being pre-qualified for a certain amount is not a guarantee of a loan approval. Because a pre-qualification is a preliminary review of financials not substantiated by documentation, a pre-qualified amount is just the amount for which you might expect to be approved. Therefore, being a pre-qualified buyer does not carry the same weight as being a pre-approved buyer.

Getting pre-approved is much more investigative. It begins with a mortgage application accompanied with the necessary documentation to perform an extensive check of your financial background, including your credit rating. The lender will then be able to tell you the specific mortgage amount for which you are approved and the interest rate you would be charged on a loan. A letter of a conditional commitment for a certain loan amount is called a pre-approval letter. A buyer shopping with one of these may have an advantage over other buyers that have not taken the time to do so. A seller will know that a buyer with pre-approval is that much closer to obtaining an actual mortgage and that they are a serious buyer.

Having a pre-approval letter also enables a buyer to move swiftly in making an offer when one has found the perfect house! For lender recommendations or help finding the home of your dreams, contact us.