You Need To Get Pre-Approval And Pre-Qualified
There is a difference between getting Pre-Qualified & Pre-Approved. A Pre-Approval is a document from the lender that confirms to the borrower a loan up to a certain amount based on a completed loan application, credit check, and possibly tax returns and employment verification. This Pre-Approval goes much further with a seller when submitted with an offer as opposed to a Pre-Qualification letter.
A Pre-Qualification is a document from a lender that basically just states that they will give you a loan based on your meeting with the lender and the information you give them about your financial situation. Neither document are an absolute guarantee that the lender will extend the loan money one or more months down the road. A reason for this is that a financial situation can change a lot before the closing date for a loan.
It’s imperative that buyers in escrow understand that they may be subjected to last minute credit checks and funds verifications during the process. As long as you remain conservative throughout your escrow period when buying a house and keep your job through that period of time, and no purchasing any credit items, your pre-approval letter from your lender is most likely a given. Remember, pre-qualifying & pre-approving is not a binding contract requiring the lender to extend the loan, nor is it a requirement for you to take on the loan. It’s simply your first real step in preparing to submit offers.
If you are wondering why you just can’t do this at the last minute, lenders do not close on mortgages until you have found the home you want to purchase. The pre-qualification enables you to see your buying power, and your pre-approval enables you to quickly get started on the home buying process.
It is more difficult to qualify for a loan because the lenders have become much more conservative in the mortgages. But a balanced combination of credit, job history, tax returns and debt analysis will land you the loan you’re looking for.
Now that we have discussed the important reasons for getting qualified, choose three good lenders and shop them all for rates and qualification letters. The beauty is that you can get qualified anywhere, and it does not require you to use that lender for your mortgage. This allows you to keep researching for that perfect rate. Rates are constantly changing, so find a rate that fits your loan.
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February 3rd, 2012 at 6:08 pm
I agree, it is imperative to obtain that preapproval letter before becoming serious about buying a house. A good match between your financial capability and the price to conclude the transaction is something to know before writing the offer.