Why A Pre-Approval and How To Get One

PreQualified-vs-PreApproved

Pre-Qualification

A pre-qualification requires you to discuss with a lender your finances. After discussing your income and assets, and your overall debt, your mortgage lender or loan officer will provide you with an idea of your mortgage qualification limit. You will discuss your goals or needs regarding the type of mortgage option you seek or need. Here’s where your lender will explain the various mortgage options available and recommend loans that are best suited to your unique situation

If you are unable to discuss this in person, many lenders can pre-qualify you over the phone. Some lenders offer this service via the Internet, too. Usually, mortgage lenders do not charge for the pre-qualification process.

One key point: lenders do not review your credit report or provide an in-depth look at your ability to purchase a home—ability to repay a loan—and risk of default.Pre-Qualified

Pre-qualification does not mean your pre-qualified loan amount is guaranteed. It is simply a guide to how much house you may be able to afford.

A pre-qualified borrower does not carry as much influence with a seller as a pre-approved borrower.

Pre-Approval

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When you are ready to search for your dream home, make your first stop your mortgage lender’s office to obtain a pre-approval.

The mortgage officer will review your current debt, income, and assets. To obtain a pre-approval status, you formally apply for a mortgage loan, where you provide all the necessary financial documentation required for a financial background check, including ‘pulling’ your credit report.

Here is where the lender determines the specific loan amount for which you are approved. You will learn more about the interest rate that you will be charged for your mortgage loan. Mortage rates will be discussed.

A pre-approval is a conditional commitment in writing for an exact loan amount. You can then feel more comfortable with your house search, knowing exactly how much loan you can expect to borrow.

Why is it so important to obtain the Pre-Approval?

      • Knowing exactly how much you can comfortably spend on a home reduces the potential frustration of looking at homes beyond your means. Basically, why break your heart finding the perfect home only to find out you can not afford it?

      • With a pre-approved status, you have bargaining power to make a deal on the home of your dreams. Your primary advantage: the seller knows a pre-approved buyer is one step closer to obtaining actual financing. Once you settle on a purchase price, you return to your mortgage lender, fill in the missing property details, and your pre-approval status will become a complete loan application package ready for underwriting review and, hopefully, approval and processing.

The more time and effort you invest in learning about home loans and defining what you want and what your capable of financing before you select a home, the smoother the path from contract to closing will be.

Ideally, before you select a home, you will have talked with one or more lenders or homeownership counselors and will:

Have decided upon the specific type of loan that will best meet your needs (for example, conventional vs. FHA), and
Feel confident that you will be able to obtain financing.

This enhances your ability to request and receive meaningful Loan Estimates for comparison later on once you have found that dream home and your offer has been accepted.

Nancy will require this document before she sets up any appointments. If you have already been pre-approved, the pre-approval must be no older than 3 months.

Ok, so I get it now…I need to have a pre-approval. So what do I have to do get one?

Decide on a lender and work with the mortgage officer who will assist you through the process of obtaining a mortgage.

All borrowers will be asked to show proper ID and sign an authorization so that the mortgage officer can run a credit report. The following documentation will also be asked for:

Pre-Approval Requirements
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