If you are considering a home purchase, a pre-approval is a critical first step. Find out what it is, why it matters, and how to get it done.
What is a Pre-Approval?
Don't confuse a pre-qualification with a pre-approval! While many people use these terms interchangeably, they are not. A pre-qualification is based on the information a potential buyer provides to a lender. Based on the information provided, the lender will state the loan amount for which the buyer could likely qualify and use it to generate a pre-qualification letter. This holds true to the extent the information provided is true and accurate.
A pre-approval, on the other hand, is more thorough. The lender actually verifies the income, assets, debts, and credit score of the potential buyer and runs this information through an automated underwriting system (AUS). For this reason, a pre-approval is more accurate and carries more weight than merely a pre-qualification letter.
In an ideal scenario, the pre-qualification is an extension of a pre-approval. Starting with the pre-approval process gives the buyer confidence in the loan amount for which he/she will be approved. This is then reflected in a pre-qualification letter. This letter, provided by a mortgage expert, verifies the loan amount for which a potential buyer will most likely be approved.
When backed by a pre-approval, the pre-qualification letter shows that a loan officer has looked into your credit. Based on income, debt, assets, and credit history the loan officer determines how much money you could borrow, what you could pay each month, and what your interest rate would be. This letter shows potential sellers that you have a lender you are working with, and you could afford the house they are selling. While the pre-qualification is not a guaranteed loan, it is a good faith sign to potential sellers that you are a serious buyer and worth their time.
Some lenders may issue a pre-qualification letter without first doing a pre-approval. While the pre-qualification letter in this case will not look any different, it does not give the potential buyer the same level of confidence as one backed by a pre-approval.
Why Should I Get Pre-Approved?
There are enough natural stressors that come with buying a new home; don't add any unnecessary stress to the list by viewing open houses or listings before you get pre-approved!
There are many reasons to start your house hunt with a pre-approval:
1. You have an accurate picture of what you can afford.
This is important for all parties - you, the seller, and the real estate agent/s. It ensures you are focusing your house hunt on homes within your budget and you are not wasting anyone's time viewing houses you cannot afford. For you, most importantly, it ensures you are not falling in love with a house that is not realistic for your budget. There are enough natural stressors that come with buying a new home; don't add any unnecessary stress to the list by viewing open houses or listings before you get pre-approved!
2. It speeds up closing time.
Much of the information you provide during the pre-approval process is the same information that will be needed to qualify for the actual loan. This will help speed up the process when you find your dream home, which is critical in a competitive market. When you are choosing your lender, be sure to ask them about their average closing time. At O Capital Group, for example, we average 14 days or less from loan submission to closing day!
3. You become a more credible buyer. When you connect at an open house or with a real estate agent with your pre-approval complete, they know you are a serious buyer. Your real estate agent knows what your true budget is, and can tailor your home search accordingly. Potential sellers know you have the means to close on the purchase, and are much more likely to accept your offer over someone who is still waiting on their pre-approval. Give yourself the edge in this competitive housing market by starting your search with a pre-approval.
At O Capital Group, we make home loans easy!
Call today: (602) 492-8930
How Can I Get Pre-Approved?
Contacting your local mortgage broker is the best way to get pre-approved for a home loan. This process can be started over the phone or in person. Expect your mortgage expert to review the following items:
* Driver's License
* Social Security Number
* Credit History
* Employment Verification
* Proof of Income
* Proof of Additional Assets
At O Capital Group, we have a same-day turnaround for pre-qualification letters in most cases. Call today to get started, or click the button below.
Are there any costs involved?
Check with your selected lender to confirm whether or not there are fees for a pre-approval. At O Capital Group, there are NO FEES to get your pre-approval!
When Should I Get Pre-Approved?
Getting pre-approved should be at the top of your To Do List when you are thinking about buying a new house. Any good real estate agent will let you know this as well. Most effective real estate agents will not start house hunting until a pre-approval is in place. This ensures you are shopping within a realistic budget, and you are not falling in love with houses you cannot actually afford.
Prefer video? Watch to learn more about the importance of getting pre-approved!
What Next?
If you are thinking about buying a new home, contact a mortgage professional today to get started with your pre-approval process.
Prefer online? Get started on your own through Blink - a safe, secure online loan application you can use on your own time.
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This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.