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Understanding Pre-qualification and Pre-approval

 

Buyers ask me all the time what the difference is between Pre-qualification and Pre-approval. If you are considering the purchase of a new home or selling your home, you may be concerned with the issue of finance. If you are a buyer obtaining the right mortgage is a key step in the home buying process, but it does not have to be a stress inducing one. Talk to your lender before you make an offer. Most lenders offer pre-qualification, pre-approval, or both to help you know where you stand. Get Prequalified and be up front about the source of your down payment money. A good lender will explain the true costs of borrowing to you so you can comfortably afford the home you want as well as the monthly payments. Sellers should always ask if a buyer that wants to see their house is already pre-qualified.

Pre-qualification: Is a preliminary estimate of how much you can afford to pay for a home based on information you provide. Because credit and employment information are not validated for prequalification, it can only be considered a rough idea of a monthly mortgage payment and loan size. This can be a useful guide as you begin the home buying process. Pre-approval for a loan amount is better than pre-qualification.

Pre-approval: Is a written commitment from a lender to finance your home purchase up to a set amount. This indicates that the lender has taken a close look into your financial history and has agreed to lend you a specific amount of money, hinging on certain details like a finalized sales contract and professional inspection. Pre-approval indicates to sellers that you are a serious home-buyer. Regardless of which option you utilize, or even if you take both steps, you will be able to shop with much more confidence.

 

The Benefits of Pre-Approval

  • Pre-approval, as opposed to Pre-qualification, signifies that the loan application has been taken through a rigorous procedure.

  • Here’s why Pre-approved buyers are ahead in the home buying game:

  •  If you make an offer on a home and then apply for a loan, you are at the lender’s mercy, who is aware that you do not have time to shop around.

  • Pre-approval saves time spent looking at houses you cannot afford.

  • A Pre-approval letter from a lender gives you an edge when multiple offers have been made on a house.

  • Pre-approved buyers can generally close escrow more quickly since most of the work has already been done.

  • Real estate financing is available from many sources, an experienced real estate professional I can suggest lenders with a history of offering excellent mortgage products and services. 

If you are Serious About Buying- It is Time to Get Pre-Approved.

 

Want to learn more? Let us talk

Valerie Bomberger, ABR Michigan Realtor

Mobile /Text (269) 208-4750

Email valeriebomberger@remax.net

 

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