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Are you pre-qualified or pre-approved for a loan?
Before you begin to shop for a new home, I should set up a time to meet with you, so I can figure out how much you can afford. This will put you in a better position as a buyer. Next, it is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, the lender will collect information about your debt, income, and assets. Next lender will look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. Then the lender will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
To get pre-approved, you will complete a mortgage application and provide various information verifying your employment, assets and financial status such as W-2 forms, bank records and credit card statements. I will review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
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