Great Article by Bill Nickerson….Be prepared as a Buyer!
In Today’s Real Estate Market, it is more important than ever to have a Pre-Qualification in hand when shopping for a home that has been prepared by a reputable Lender, Bank or Credit Union.
Pre-Qualification
A mortgage loan pre-qualification is an estimate of how much house you can afford and how much money a lender would be willing to loan yo
u. The best time to get pre-qualified is right before you start looking at homes. This way you can focus on looking at houses that are within your price range. By providing a loan officer with your income, assets, debts, and a potential down payment amount, he would then be able to give you a ballpark figure of how much he thinks you could afford to pay for a monthly mortgage. Your Credit is reviewed and your loan is submitted through an Automated Underwriting Service (AUS). There is no cost to this service and no commitment is required. This estimate is a helpful tool to you in figuring out if buying a home is a viable option, and if so, what your price range would probably be. A pre-qualification is to give you a range of home prices and in no way is a commitment to lend on a home. The time frame for this is less than 24 hours.
Pre-Approval
Getting pre-approved means that you have a tentative written commitment from a lender for mortgage funding. In the pre-approval process, you provide a loan officer with actual documentation of your income, assets, and debts. The Loan Officer is submitting this as if it is an actual loan and a property has been identified. This will be reviewed by the lenders underwriting team. The lender will run a credit check and verify all your employment and financial information. Once the final approval comes in, the lender will give you a letter of commitment stating how much money the bank is willing to loan you for a home purchase. Having a certified pre-approval in hand when you start house hunting lets real estate agents and sellers know you are serious about buying when they see you have your mortgage funding in place. By having your funding in place, it becomes an extreme advantage over other buyers when it comes to negotiating your home purchase as your offer will stand above the rest and you will be able to close in a much shorter time period. The timeframe for a Pre-Approval can take up to 5 Business Days.
It is important to note that a pre-approval and a pre-commitment is still subject to further review as any loan is. As variables change in lending or in the borrowers financial picture, additional items may be required. In addition to the financial commitment, the lender will also need to verify the property appraisal and title search.
Bottom Line:
Pre-Qualification is an estimate of a price range of what you can afford by verifying credit, income and running your loan through an Automated Underwriting System such as Fannie Mae or FHA as well as others. Pre-Approval is a verified commitment from the bank stating how much money it will loan you. Make sure your Pre-Approval is an actual commitment from the bank as opposed to a Loan Officer just doing a quick credit check.
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