Should You Get Pre Approved For A Mortgage

Should You Get Pre Approved For A Mortgage – Many real estate buyers have heard that if they want to buy a home, they need to get pre-approved or pre-approved to buy a home. These are the two main steps in the mortgage application process.

Some people use the terms interchangeably, but there are important differences that every home buyer should understand. Prequalifications are only the first step. It gives you an idea of ​​how big a loan you qualify for. Pre-approval is the second step, committing to the conditions to be given a home.

Should You Get Pre Approved For A Mortgage

“The prequalification process is based on the information provided by the buyer,” said Todd Kaderabek, resident broker associate with Beverly-Hanks Realtors in Asheville, NC. “Pre-approval is verified customer information – for example, a credit check.”

Why You Should Get A Mortgage Pre Approval

Pre-qualification involves providing a complete financial picture to the bank or lender, including debt, income and assets. The lender reviews everything and gives an estimate of how much the borrower can expect. Prequalification can be done over the phone or online and is usually free.

Pre-qualification is fast, it usually takes one to three days to receive the pre-qualification letter. Keep in mind that loan prequalification does not include a review of credit reports or an in-depth look at a borrower’s ability to purchase a home.

The first step of prequalification allows for a discussion of any goals or needs related to the home. The lender explains the different mortgage options and recommends the type that might be best.

Mortgage loan variations are illegal. If you think you have been discriminated against based on your race, religion, sex, marital status, use of public assistance, national origin, disability or age, there are steps you can take. One of those steps is filing an application with the Consumer Financial Protection Bureau or the US Department of Housing and Urban Development (HUD).

How To Get Pre Approved For A Mortgage (and Why It’s A Must Right Now)

Also, the estimated cost is not a reliable thing because it is only based on the information provided. This is the only amount that the borrower can expect. A pre-qualified customer does not carry the same weight as a pre-qualified, verified customer.

Also, being pre-qualified can be helpful when it comes time to present. “A letter of pre-qualification is only required for an offer on our market,” said Kaderabek. “Sellers are smart and don’t want to sign a contract with a buyer who can’t live up to the contract. That’s one of the first questions we ask a potential buyer: Have you met the lender and have you seen the quality. Status. ? If not, we advise borrowers of options. If is so, we are looking for a copy of the pre-qualification letter and keep it in the archive.”

Pre-approval is the last step and involves a lot. “Prequalification is a good indicator of creditworthiness and creditworthiness, but creditworthiness is the key word,” said Kaderabek.

The borrower must complete a home loan application that will be pre-approved, as well as provide all necessary documents to the lender to perform a detailed credit and financial check. The lender will provide pre-approval up to a certain amount.

Documents Needed For Mortgage Preapproval

Going through the pre-approval process will also give you a better idea of ​​the interest rate being paid. Some lenders allow borrowers to pay interest or pay a pre-approval fee, which can be hundreds of dollars.

Lenders provide binding contracts in writing for the full loan amount, allowing borrowers to find homes at or below that price level. This puts borrowers at an advantage when dealing with a seller because they are one step closer to getting a mortgage.

The advantage of completing two steps — pre-qualification and pre-approval — before looking for a home is that it gives an idea of ​​how much the borrower needs to spend. This avoids wasting time on expensive items. Getting pre-approved for a mortgage also speeds up the actual buying process, letting the seller know the offer is serious in a competitive market.

The Lender provides the Lender with a copy of the Purchase Agreement and any other documents required as part of the listing process after selecting a home and making an offer. The lender hires an approved or licensed third-party contractor to appraise the home to determine its value.

Why Should You Get Your Mortgage Pre Approved

Your finances and credit standing are also reviewed to ensure that nothing has changed since the initial approval, so this is not the time to go out and finance a large furniture purchase.

The last step in the process is the commitment of the loan, which the bank gives only if it approves the borrower, as well as the house in question – which means that the house is appraised or based on the sale price. The bank may also request additional information if the inspector finds something that needs to be investigated, such as installation problems or malfunctioning HVAC systems.

Getting pre-qualified and pre-approved for a loan gives potential home buyers a good idea in advance of how much they can afford. But most sellers will prefer to negotiate with those who are already approved. Pre-approval also allows borrowers to close on their home faster, giving them a competitive advantage in a competitive market.