FAQ: Why Do I Need a Mortgage Pre-Approval?

Obtaining a mortgage can be a long, drawn out process. A mortgage pre-approval will help:

• confirm your eligibility for a home loan
• help you shop for homes in the right price range
• help you feel more confident in the home buying process

avoid disappointment in the event you do not qualify for a loan or qualify for the amount you want or need to buy a specific home.

A mortgage pre-approval will be based on your loan application, three credit reports and income verification. Before you shop for a mortgage pre-approval, review your own credit history and determine what you believe you can comfortably afford to pay for housing including taxes and insurance.

Check your own credit report for any potential problem areas. Your ability to get a loan and the interest rate you pay will be directly impacted by your credit score.

Federal law entitles you to one free credit report in a 12-month period from each major credit reporting agency. You can easily obtain your free report at www.annualcreditreport.com. It's best to do this before you seek a mortgage pre-approval so you can dispute any errors. You can also call the three major nationwide consumer credit reporting companies for your free report:

• Equifax: 1-877-576-5734; www.equifax.com
• Experian: 1-888-397-3742; www.experian.com/fraud
• TransUnion: 1-800-680-7289; www.transunion.com

Real estate experts tell first-time home buyers that it's critical to apply for a mortgage pre-approval.

Mortgage Pre-approval vs. Mortgage Pre-Qualifications

Don't be confused by the terms "mortgage pre-approval" and "mortgage pre-qualification." A mortgage pre-qualification is the first step to getting a mortgage pre-approval, but it is by no means the last step. It is no guarantee you will get a mortgage pre-approval.

A mortgage pre-qualification involves giving your Arizona mortgage lender the big financial picture of your life. This can be done over the telephone, or on the Internet, but it does not usually require any application fee or require you to substantiate income and expense claims. At this time, the lender will determine how much you are most likely to be able to afford for a house payment. This will also help you to determine the price range in which you should shop for houses.

A mortgage pre-approval is a more formal process that will require some fees including an application fee and a credit report fee. You'll be asked to provide documents to verify employment or other forms of income. The mortgage lender working on the mortgage pre-approval will pull your credit reports and review your credit history. A mortgage pre-approval is a better guarantee of your eligibility than a mortgage pre-qualification.

Bargaining Power Comes with a Mortgage Pre-Approval

Would-be buyers have been disappointed many times when they find the perfect house, only to find they do not qualify for a loan. Many home sellers have been sorely disappointed too. Sellers are wary of lookey-loos who can't really qualify to purchase their property. A mortgage pre-approval will give you bargaining power. If you can lay your mortgage pre-approval out on the table, sellers are more likely to bargain with you.

My name is Jamey Thorley, with Solutions Real Estate in Gilbert, Arizona. I have a vast network of lenders and other real estate transaction support services in the Gilbert, Arizona area.

My preferred lender is Nova Home Loans. Let me introduce you to these mortgage experts.

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