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 Are you pre-qualified or pre-approved for a loan?
Before you begin to shop for a new home, I suggest you take a few moments to discuss your home financing needs with me and it will help your real estate agent during your negotiations with the seller. Making an offer on a home before speaking with a mortgage broker may cause you some difficulties. There is a difference between being pre-qualifed and pre-approved. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, I will collect information about your debt, income, and assets. We’ll look at your credit score and history to determine what type of loan and the interest rate you qualify for. Next, I will give you a pre-qualification letter indicating the amount you are pre-qualified to borrow based on the above information that you have given me.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. The pre-qual letter is based on your representations of the above information and we do have to collect supporting documentation to issue this letter.
Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount. This letter will let the home seller know that we have checked your income, credit, assets and have submitted a loan application to a lender who has conditionally approved your loan.
The first step to get pre-approved is to
complete a mortgage application and provide me with various information verifying your employment, assets and financial status such as W-2 forms, bank records and credit card statements. We’ll review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount the lender is willing to lend you for your home.
The pre-approved letter will state a specific amount that you may borrow, as long as you meet all the conditions the lender sets out. Now your real estate agent can take you shopping for a home and you won't have to get a letter for each home, the same letter can be used for many different homes if you wish to make offers on more than one.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
I will keep you informed of where interest rates are moving. If interest rates are moving up, I will call you to discuss your options. You can lock a loan for up to a 90 day period, if you haven't found a home in the first few weeks. When interest rates are going down, you don't have to worry because you will still be pre-approved.
If you have any questions about the mortgage process, please call or email me at your convenience and I will be happy to answer all your questions.
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