What to know when obtaining a Lender and Getting Pre-Approved and Pre-qualified.
Back in the day home buyers would go house shopping and when they are ready and have found their dream home, they then go to get pre-approved. However, in today’s market this has since changed. This old method of house first pre-approval later has proven to be one of the least effective methods in landing your dream home.
Did you know that most lenders can pre-qualify you for a mortgage over the phone? They do so based on some general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you can qualify for. However, being pre-qualified and pre-approved are different things.
Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. With a pre-approval you will know exactly what your maximum loan amount will be.
Pre-qualified on the other hand is simply a letter and it is not verified. Its value doesn’t hold as strong as a pre-approval and it does not count for much if you are competing with other buyers who are pre-approved. When you are pre-approved, you and the seller know exactly how much of a loan you can afford.
A pre-approval gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property, hence it shows the seller your seriousness when you put in an offer.
In addition to being pre-approved, it’s important to be pre-approved with a legitimate lender. Finding a legitimate lender is key to ensuring a smooth mortgage process with no bumps on the road. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, mortgage brokers, and online lenders. Ask your realtor to help secure you with a legitimate lender.
Some tips on lenders to avoid:
1. Lenders who lose a form or misplace a file
2. Lenders who gather information from you in an unorganized manner
3. Lenders who are not informed about interest rates, points, or costs
4. Lenders who cannot provide you with the right information.