Depending on your market, multiple home offers are becoming more common. That’s why it’s important for you to be armed with all of the necessary tools before you find your dream home. Getting a letter from your mortgage lender before you start looking for your home is a great way to get an advantage over others in the bidding process. But with lenders offering both pre-qualification and pre-approvals, it can be tough to figure out exactly what you need. Understanding the difference between the two can be crucial to getting the home you want.
What is a lender pre-qualification?
This is the first step to getting a mortgage. In this process, the lender will ask you a few questions about your overall financial picture, including your debt, income and assets. After evaluating the information, the lender will provide an estimated mortgage amount based on the unverified information provided. This will give you an idea of how much home you can afford as you start your hunt. It’s important to realize that since this is based on unverified information and does not include a credit report, it does not carry the same weight as a mortgage preliminary approval.
What is a lender preliminary approval?
The next and more detailed step in the mortgage process is generally a preliminary approval. In this step, you’ll complete a mortgage application and provide the lender with all of the necessary documentation to evaluate your current financial picture. The lender will also check your credit rating. A preliminary approval estimates how much you may be able to borrow based on your verified income, assets and credit report scores. Having a preliminary approval letter makes you more competitive against other bidders but also increases the chance that the lender who offered the preliminary approval will provide your financing.
Are there other options?
Yes, depending on your lender, there may be a variety of additional options. With Prosperity Home Mortgage’s Prosperity Buyer Advantage Program, for example, you can complete much of the financing process (and qualified borrowers may receive a commitment letter) before you even begin searching for a home. Having that commitment letter along with your purchase offer can help further strengthen your position.
The bottom line is that when it comes to buying your dream home, having as much ready upfront as possible is key to putting in a successful purchase offer. Doing your research and securing a preliminary approval is the best way to make sure that your offer is accepted when the time comes, and you get to move into the perfect home for you.