October 14th, 2020 3:48 PM by Don Spears
Are you pre-qualified or pre-approved for a loan?
Before you start shopping for your new home, give me a call so we can figure out how much you will be able to afford. As a buyer, this will put you in a better position. It is during this time that it is crucial to understand the difference between being pre-qualified for a loan, and being pre-approved for a loan. You will need to know the difference between these two terms later when you decide to make an offer on a house.
To get pre-qualified for a loan, I will analyze information regarding your debt, income, and assets. We will look at your credit profile and assess goals for a down payment and look at different loan programs that will work for you. I will then issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.
It is important to understand that a pre-qualification letter is merely an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have already been approved for a loan for a specified amount.
To get pre-approved, you will complete a mortgage application and provide me with various information verifying your employment, assets and financial status, such as W-2 forms, bank records and credit card statements. We will look over your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.