If you are serious about buying - it is time to get pre-approved
Many online buyers will call a lender while they are looking to seek information about financing. In the process, they become “pre-qualified”. That gives them a good idea of what they can afford, or more accurately, what loan amount they qualify for. You should take it one step further. If you are not already, get yourself pre-approved now. You will be in a stronger position to buy when you find the right home.
You become pre-approved when you apply for a loan. The lender checks credit, verifies employment, and often verifies that you have sufficient funds to close. Then once you find your dream home, just about the only thing left is the appraisal. Sellers prefer pre-approved buyers because it can cut significant time out of the closing process.
Pre-approval can really help to determine your price range. Which helps you narrow your choices of homes to buy. You will already know how much you can afford before you even start looking.
Pre-Qualification vs. Pre-Approval
Amy and Brad immediately fell in love with the two-story with a brick patio and big backyard. They quickly made an offer and began looking for lenders. Unfortunately, they soon discovered that they could not qualify for the home. They tried to find something else in their price range, but other houses paled in comparison. If only they had shopped for loans before looking at houses…
One surefire way to reduce stress during the process of home buying is to seek pre-approval, applying for a loan before finding a house. The loan agent assembles a credit package that includes a loan application, credit report, income and asset information, and supporting documentation. These documents are then submitted to prospective lenders who underwrite the file, issuing credit approval or denial.
Buyers who are pre-approved are taken more seriously than their pre-qualified counterparts. Pre-qualification is not a loan commitment from a lending institution; it is only a loan agent’s opinion that you will be able to obtain financing. Verification's are not usually made so formal approval is not issued. These days, virtually anyone can achieve pre-qual status.
Pre-approval, on the other hand, signifies that the lender has taken the application through a rigorous procedure. So buyers with pre-approval status can basically write their own ticket.
Benefits of pre-approval:
1. If you make an offer on a home and then apply for a loan, you are at the lender’s mercy. He sets the interest rate and points, aware that you do not have time to shop around.
2. Understanding the breadth of your financial reach will save the time spent looking at houses you can’t afford.
3. Shopping for a loan allows you to settle on a house payment that fits your lifestyle. If you rely on your lender to tell you what you can afford, you may end up with a high mortgage payment. Most people can qualify for more than they would feel comfortable paying.
4. Having a pre-approval letter from a lender gives you an edge in a situation where multiple offers have been made on a house.
5. Pre-approved buyers can generally close escrow more quickly. Once you submit your credit package, most of the legwork has already been done.
Remember, neither pre-approval nor pre-qualification are absolute loan commitments. Lenders must still assess property appraisals, verify information, and, in many cases, verify credit before funding the loan.