Home Buyer Tip #3 The Difference Between Pre- Qualified and Pre-Approved

By
Real Estate Agent with Irongate Realtors

I hope that you're enjoying these home buyer tips I'm sending. I really want to insure that I'm bringing value and that the information I'm sharing with you will help you save money and avoid a home buying mistake.

OK, let's get on with this week's tip.

Did you know that when you make an offer on a house the seller will ask you for a letter of pre-approval? If you don't have one and you're competing with other buyers for the same house, you could end up losing out on your dream home. The first step to understanding this is knowing the difference between pre-qualification and pre-approval.

Many borrowers confuse being "pre-qualified" with being "pre-approved." Pre-qualification is a pretty casual process, where a lender tells you how much money you probably can borrow based on how much money you make, how much debt you already have and how much cash you have for the down payment.

Getting pre-approval, by contrast, is a much more rigorous process and involves actually applying for a loan. You typically submit tax returns, pay stubs and other information. The lender verifies the information and checks your credit. If all goes well, the lender agrees in writing to make the loan.

In a hot or even warm real estate market, the house hunter who is only pre-qualified is at a significant disadvantage. Home sellers and their agents give much more weight to offers being made by buyers who already have a loan lined up.

Also, pre-approval will let you know how much you can afford so that you can look for homes in your price range. Getting pre-approved helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Once you are pre-approved, you avoid the frustration and let down of finding homes that you think are perfect, but are not in your price range.

Don't be intimidated by all of this. Talk with a qualified lender that will help guide you through the process. Choosing a lender is one of the most critical steps that you can take when applying for a mortgage. If you have a lender lined up already, great. However, I have had the great opportunity of working with several very reputable lending agents, and I would be happy to introduce them to you.  I trust that any of them would use their professional knowledge to guide you in the process.  Like me, they uphold the integrity of the profession while showing genuine care for their clients.  

Make sure to mention my name when you call them. Julie Beall

Well, that's it for this week. Watch for next week's tip, "Understanding How Much You Can Afford".

Comments (1)

Jeff Stinson
Kasteel Property Management - Property Manager - Springville, UT

One thing to look for and ask for on your letter is that you have an automated underwriting approval.

May 28, 2008 06:12 PM

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