Pre-Qualification vs. Pre-Approval
Reduce stress during the home buying process by getting pre-approved. Buyers who are pre-approved are taken more seriously than their pre-qualified counterparts.
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 making it not as impressive or meaningful. Pre-approval, on the other hand, signifies that the application has been taken through a rigorous procedure and that you are guaranteed money. Pre-approved buyers enjoy these benefits:
1. By first applying for a loan and then making an offer on a home, you have time to shop lenders and get the best interest rates. If the lender has competition, you will receive competitive interest rates and points. Remember, If you shop around for the best deal when buying a car, you should shop around for the best deal when buying a home.
2. Pre-approval saves time spent looking at houses you can’t afford. Don't fall in love with something just to be told you can't make the payments work. If you are worried that you will not be approved for the price range that you want, try to save a larger down payment.
3. If you rely on your lender to tell you what you can afford, you may end up with a high mortgage payment. Mortgage eligibility is based on your gross income, but you make payments from your net income. Most people can qualify for more than they feel comfortable paying.
4. Having a pre-approval letter from a lender gives you an edge when multiple offers have been made on a house. Inventory is low so it is common for a home to receive many offers. Make sure you stand out by being pre-approved!
5. Pre-approved buyers can generally close escrow more quickly. Once you submit your credit package, most of the legwork has already been done. Work smarter, not harder!
If you are in the market to buy and do not know where to start, feel free to reach out to us - we can help!
Have a great day!