Title:
Home Loan
Pre-Qualification vs. Pre-Approval
Word Count:
471
Summary:
Once you've
decided to buy a property, the first step is not to go house hunting. Instead,
you should find out what you can borrow. In doing so, it is important to understand
the difference between loan qualification and approval.
Keywords:
home loan,
pre-qualified, pre-approval
Article Body:
Once you've
decided to buy a property, the first step is not to go house hunting. Instead,
you should find out what you can borrow. In doing so, it is important to
understand the difference between loan qualification and approval.
Pre-Qualified
Getting pre-qualified for a home loan carries little if any weight when it
comes to actually getting the loan issued. Let's take a look at why.
Its time to buy your first home and you've done the research. The first step is
to find out how much you can borrow. Down to the bank you go for a sit down
with a friendly home loan officer. This person asks you questions about
finances, salaries, credit and so forth. You might even be asked to fill out a
short questionnaire. After a surprisingly short time, the bank officer suggests
a loan amount of around $300,000 is probable. Being really helpful, the bank
officer even prints out a form letter with your name and the pre-qualification
amount of $300,000. Wow, that was easy...perhaps to easy?
The problem with pre-qualifications is they are based on best guesses. The bank
officer looks at no hard facts. When it comes time to actually apply for the
loan, you can be assured the lending institution isn't going to be willing to
guess. In fact, you might be told you don't qualify for a $300,000 home loan
when push comes to shove. You might only qualify for $250,000. In nightmare
situations, you might not qualify at all because of credit problems. In short,
home loan pre-qualification is a waste of time for the most part.
Pre-Approval
Getting pre-APPROVED for a home loan is definitely your best option. Getting
pre-approved for a home loan is an excellent strategy because you actually go
through the process. Issues such as income, credit scores, personal wealth and
so on are resolved. At the end of the process, the bank agrees to issue a loan
up to a certain amount contingent on an appraisal of the home you eventually
decide to buy. The lender will produce a letter indicating as much, and it is a
very valuable letter.
A pre-approval letter is instant gold in the real estate market. If you were
selling a home, would you prefer a buyer with a pre-approval letter or one
without? The answer is obvious and leads to another advantage. In the current
market, it is likely you will be bidding against other parties for property. A
seller is much more likely to select your bid because they know the loan process
will go smoothly. This can make all the difference when it comes to closing a
deal.
Determining how much money you can borrow is the first step in the purchase
process. Just make sure you get a pre-approval letter, not pre-qualification
guesses.