About Pre-Approvals
Pre-approved vs. Prequalification…. Know the Difference Before You Speak to a Lender
Now that you have made the decision to purchase your first home, you need to know how much a lender is willing to loan you. There are two methods for this task. Many lenders offer a quick prequalification but considering this method is a preliminary estimate based on information you verbally provide your lender and documentation is not validated it can only be considered an estimated figure. Your monthly payment based on this type of qualification may be significantly different once all documentation is reviewed. A preapproval is a written commitment from your lender having reviewed your income, credit, documentation and so on. This means you are approved for the loan reliant on certain conditions, updated documents, property appraisal and so forth. The majority of first time homebuyer’s reluctance to be preapproved is a fear of a credit score reduction from having a lender pull credit. This fear is unfounded. You are entitled to have up to 4 mortgage lenders review your credit in a 14 day period. Differences
- Prequalification- is a preliminary estimate of how much you can afford to purchase a home for based on information you provide by phone, email or in person. Because credit and employment information aren’t validated for prequalification, it can only be considered an estimate of a monthly mortgage payment and loan size.
- Preapproval- is a written commitment from a lender to finance your home purchase up to a set amount. Your pre-approval is generic to any property within and up to your approved loan amount. Your pre-approval indicates that the lender has taken a close look at your credit history, finances and employment and has agreed to lend you a specific amount of money, subject to whatever terms and or conditions set forth. The residential finalized sales contract, appraisal and if required professional inspection must also be met. When you are preapproved for a loan before you have a specific property in contract your lender will enter property as To Be Determined. Furthermore, the preapproval method will uncover any credit or other issues that may need to be addressed prior to initializing a contract of sale. The pre-approval document indicates to sellers that you are a serious homebuyer and is required by most realtors prior to personal property viewings
The pre-approval document indicates to sellers that you are a serious homebuyer and is required by most realtors prior to personal property viewings. This information is deemed reliable but is not guaranteed, always consult a professional!
