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 Are you pre-qualified or pre-approved for a loan?
Before you begin to shop for a new home, you should set up a time to meet with me so we can figure out how much you can afford. This will put you in a better position as a buyer. That’s when it is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, I will collect information about your debt, income, and assets. We’ll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. I will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow. This can make a difference when submitting a contract for your new home, and if you don't have one then chances are the sellers may not even consider your contract.
It is important to understand that a pre-qualification letter is just 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 been approved for a loan for a specified amount with an actual Lender.
When going through the loan process and submitting your information to the Lender, then you've already gone through most of the work up front and your loan can close much quicker. 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, 30 days of paystubs, 3 months most recent bank statements, as well as a review of your credit. We’ll review 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.
Depending on the loan type and lender your pre-approval can be good from 60 to 120 days without having to re-qualify. That will usually give you enough time to find a home, and you may only need to update a paystub or bank statement to continue with your pre-approval. 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.
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