Pre-qualification versus pre-approval
By Stephen Fritz, Realtor 832-483-1839
Shopping for a home can be a much smoother process if you research the price range for which you qualify before getting your heart set on the home of your dreams. There are two options when talking to a lender before shopping for your home: seeking pre-qualification or pre-approval.
If a lender pre-qualifies you for a home loan, it gives you an idea of how much money you might qualify to borrow. To obtain pre-qualification, you provide a lender approximate income, current debts and any important details from your credit history. Typically, pre-approval means that your financial situation has been verified by the lender. You actually fill out a mortgage loan application.
After examining your financial situation, your lender will commit in writing to fund your loan, pending a successful appraisal of the home and a few other conditions. Your lender may also provide you with a Conditional Approval Letter. There's no commitment on your part to follow through with the loan, but getting pre-approved for a mortgage enables you to move quickly when you find the home you want and make an offer that is not contingent upon obtaining financing.
It also lets a seller know your offer is serious and could prevent you from losing out to another purchaser who already has financing arranged.
If you are pre-approved for a larger mortgage than you had in mind, don't worry. Just because you're approved for a large mortgage doesn't mean you have to use it all.
Your Realtor can explain the mortgage process, describe how it fits into the larger real estate transaction, and show you how to determine the price range you're comfortable with. Be smart, take steps to secure your finances, and get pre-approved for a home loan. Soon, you'll be in the home of your dreams.
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