Bristol, Farmington, Burlington, Southington,
Plymouth and Plainville
Real Estate.
531 Broad St., Bristol, CT. 06010 Phone: 860-589-0101
Pre-Approved or Pre-Qualified: Know the Difference
Sellers as well as buyers should know the difference between pre-qualification and pre-approval, because one is fairly safe to rely on, while the other is not.
Many lenders will pre-qualify a buyer for a loan over the telephone. They take a bare minimum of information and based on that, tell the buyer "how much house" they can afford, based on that day's mortgage interest rates. They may or may not have checked the buyer's credit report before issuing a pre-qualification letter.
They haven't met with the buyer, nor have they verified any of the information the buyer has supplied. That means they also haven't gone into details and asked pertinent questions, such as "How long have you been employed in this line of work?"
Thus, pre-qualification only means that obtaining a loan is likely, but not assured. If you read a pre-qualification letter you'll see that it is filled with contingencies related to the buyer's credit-worthiness.
Pre-approval, on the other hand, does mean something.
When you're pre-approved it means that the lender has examined all pertinent information about your financial picture and has determined that you are credit worthy and can obtain a loan up to a certain amount, and under certain loan programs.
A letter of pre-approval implies that a credit decision has been made.
Pre-Approval Before House Hunting is a Smart Move
Once you've been pre-approved, and as long as your financial picture doesn't change, you can be assured of a loan contingent upon approval of a home that falls within the price limitations and qualifies for the loan program your lender has specified.
Certain loan programs, such as FHA and VA, impose specific requirements on the home in order to assure that their borrowers won't be subjected to major repairs in the near future. If this is the kind of loan for which you qualify, your lender can give you a checklist so you can avoid offering on homes that will not qualify.
In all cases, final loan approval would rest on other issues involving the home, such as an appraisal for at least as much as the loan value, clear title, and acceptable inspection reports.
Pre-approval for a loan can save you time and give you a competitive edge.
When your Henri Martin Real Estate agent knows the top dollar you can qualify for, he or she won't show you homes you might want but can't have. This saves both time and heartache.
Then, once you've chosen a home, your letter of pre-approval will give you a competitive edge if other buyers are also offering on the same home.
Sellers are far more likely to choose your offer, knowing that you can buy the home, than they are to choose an offer from a buyer who has yet to meet with a lender.
So before you begin house hunting, shop for a lender, and get pre-approved. You'll be glad you did.
And meanwhile, read "How Much Can You Afford to Pay For Your New Home." It will give you some guidelines to follow while you're researching homes for sale, and waiting for that pre-approval letter.
