Pre-Qualification vs. Pre-Approval
So, you're ready to begin looking for the home of your dreams. Imagine you find the perfect home and are ready to make an offer. Other Buyers are also looking at your home and you have to move fast. Did you know that your Realtor cannot put your offer in without a lender's pre-qualification or pre-approval letter attached to the offer? If you don't have one, you can lose your dream home.
One sure way to reduce stress during the process of home buying is to seek pre-approval. Buyers who are pre-approved are taken more seriously than their pre-qualified counterparts.
Pre-qualification is not a loan commitment from a lending institution; it is only a loan agent’s opinion that you will be able to obtain financing. Virtually anyone can achieve pre-qualification status. Pre-approval, on the other hand, signifies that the application has been taken through a rigorous procedure. Pre-approved buyers enjoy these benefits:
1. If you make an offer on a home and then apply for a loan, you are at the lender’s mercy. He sets the interest rate and points, aware that you do not have time to shop around.
2. Pre-approval saves time spent looking at houses you can’t afford.
3. If you rely on your lender to tell you what you can afford, you may end up with a high mortgage payment. Most people can qualify for more than they feel comfortable paying.
4. Having a pre-approval letter from a lender gives you an edge when multiple offers have been made on a house.
5. Pre-approved buyers can generally close escrow more quickly. Once you submit your credit package, most of the legwork has already been done.
Remember to call your lender and get your pre-approval or pre-qualification letter before you go looking for your dream home.