Pre-Qualification vs. Pre-Approval
One sure way to reduce stress during the process of home buying is to seek pre-approval. Buyers who are pre-approved are taken more seriously than their pre-qualified counterparts. In fact, many sellers won't even let you view their home unless you have a pre-approval letter from your lender.
Pre-qualification is not a loan commitment from a lending institution; it is only a loan agent’s opinion that you will be able to obtain financing. Virtually anyone can achieve pre-qualification status. Pre-approval, on the other hand, signifies that the application has been taken through a rigorous procedure, usually involving credit checks and income verification. When considering the benefits of pre-approval, keep these things in mind:
1. If you make an offer on a home before being pre-approved for a loan, you are then at the lender’s mercy. They will set the interest rate and points, knowing that you do not have time to shop around.
2. If you rely on the pre-qualification from your lender to tell you what you can afford, you may end up with a high mortgage payment than you wanted. Most people will qualify for more than they feel comfortable paying. Get pre-approved and see the numbers for yourself.
3. Pre-approval saves time spent looking at houses you can’t afford.
4. Having a pre-approval letter from a lender gives you an edge when multiple offers have been made on a house. Our current market is such that a seller often receives many offers within the first few days of being listed. If you come to that seller with a pre-qualification instead of a pre-approval, that alone may take you out of the running.
5. Pre-approved buyers can generally close escrow more quickly. Once you submit your credit package, most of the legwork has already been done.
Message me personally with any questions that you have. And stay tuned for more Real Estate advice!