Without good preparation, many buyers get lulled into the mistaken notion that if a lender pre-qualifies them for a mortgage this means that they have been pre-approved
for a home loan. Unfortunately, there's a world of difference between
these two terms. If you've ever been confused by the two, we'll bring
you up to speed on how these terms differ - and why a misunderstanding
can mean disaster for borrowers.
The Skinny on Pre-Qualified Getting
pre-qualified is the initial step in the mortgage process, and it's
generally fairly simple. You supply a bank or lender with your overall
financial picture, including your debt, income and assets. After
evaluating this information, a lender can give you an idea of the
mortgage amount for which you qualify. Pre-qualification can be done
over the phone or on the internet, and there is usually no cost
involved. Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.
initial pre-qualification step allows you to discuss any goals or needs
you may have regarding your mortgage with your lender. At this point, a
lender can explain your various mortgage options and recommend the type
that might be best suited to your situation.
it's a quick procedure, and based only on the information you provide
to the lender, your pre-qualified amount is not a sure thing; it's just
the amount for which you might expect to be approved. For this reason, a
pre-qualified buyer doesn't carry the same weight as a pre-approved
buyer who has been more thoroughly investigated.
The Skinny on Pre-Approved Getting
pre-approved is the next step, and it tends to be much more involved.
You'll complete an official mortgage application (and usually pay an
application fee), and then supply the lender with the necessary
documentation to perform an extensive check on your financial background
and current credit rating.
(Typically at this stage, you will not have found a house yet, so any
reference to "property" on the application will be left blank). From
this, the lender can tell you the specific mortgage amount for which you
are approved. You'll also have a better idea of the interest rate you
will be charged on the loan and, in some cases, you might be able to
lock-in a specific rate.
With pre-approval, you will receive a conditional
commitment in writing for an exact loan amount, allowing you to look for
a home at or below that price level. Obviously, this puts you at an
advantage when dealing with a potential seller, as he or she will know
you're one step closer to obtaining an actual mortgage.
The other advantage of completing both of these steps - pre-qualification and
pre-approval - before you start to look for a home is that you'll know
in advance how much you can afford. This way, you don't waste time with
guessing or looking at properties that are beyond your means. Getting
pre-approved for a mortgage also enables you to move quickly when you
find the perfect place. When you make an offer, it won't be contingent
on obtaining financing, which can save you valuable time. In a
competitive market, this lets the seller know that your offer is serious
- and could prevent you from losing out to another potential buyer who
already has financing arranged.
you have found the right house for you, you'll fill in the appropriate
details and your pre-approval will become a complete application.
Getting Committed The final step in the process is what's called a "loan commitment",
which is only issued by a bank when it has approved you, the borrower,
and the house in question. This means the home should be appraised
at or above the sales price. The bank may also require more information
if the appraiser brings up anything he or she feels should be
investigated (i.e. structural problems, accessibility issues,
or litigation in progress). Your income and credit profile will be
checked once again to ensure nothing has changed since the initial
loan commitment letter is issued only when the bank is certain it will
lend, so the commitment date on your purchase contract should be closer
to closing than to the date of your offer. (The seller can ask to see
that letter as soon as the date has passed, so beware of anyone who
tries to put an early commitment date into your contract).
One Last Word Be
warned. Pre-approved and pre-qualified are not the same thing, so don't
assume that the bank will provide your loan until you have the former.
The mistake could cost you your new home!
An accomplished Realtor, small business owner, and Ironman triathlete,
Mark excels in delivering a high level of service and communication to
his clients. “Bottom line, I have a real passion for helping people,
and in the ever-changing landscape of the North Texas real estate
market, my clients appreciate how I can help them navigate through the
process of buying or selling a home”. Mark uses his exceptional skills
to help his clients go from point A to point B in the shortest amount of
time, with the least amount of hassle, and with the most money left in
their pockets. Please
call or email Mark Mulch at 972-841-2324 or [email protected]
Start the search for your next home at www.MarkSellsTexas.com
Author:Mark Mulch Phone: 972-841-2324 Dated: August 31st 2014 Views: 1,326 About Mark: An accomplished Realtor, small business owner, and Ironman triathlete, Mark excels in delivering a h...
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