Buying a home is one of the biggest investments you will probably do in your life. For the majority of us, managing all the costs out of our savings is literally not possible.
So, to make a convincing offer to the property owner, you need to arrange a mortgage equal to the amount of your desired home. For that sake, you may either get pre approval or pre qualified.
In simple words, mortgage pre qualification is the calculation of how much loan you may get against your financial history. Financial history includes your credit, debt, income, assets, as well as your credit score.
When you approach lenders, they take this information from you and estimate the net value they can give you to buy a home.
The chief advantage of mortgage pre qualification is that you would get a fairly nice idea of how much financial worth you have so you may plan your purchase accordingly.
You may say mortgage pre approval is an advanced stage of mortgage pre qualification. It involves the exact calculations of your total worth. Here, you would not only share the information but have to provide the documentary evidence as well.
A mortgage preapproval is actually an advanced step of pre qualification. So, you are supposed to provide documentary evidence of all your statements about financial history. The lender is likely to verify provided documents such as income, employment, assets, and debts, and will check your credit report.
Get the following documents prepared when you aim to get pre approval:
Based on all these figures, you are likely to get a letter from the lender which would bear the amount your lender is willing to pay you and would mention the type of property as well.
When you would go to bid or buy any property in the market, you may show that letter to the seller’s agent or the owner herself. Though it is not like a final letter it would serve one purpose well and that it would reflect that you are a serious potential buyer.
You may start finding a home based on the amount you can borrow from the mortgager
It would give you confidence and certainty to bid for any property which comes in your financial bracket.
As a general rule, it varies from place to place and lender to lender. For the pre qualification facility, it does not take much time and you may get it online in a single day.
However, pre approval involves exact information so it is likely to take more time. First, you will be providing all the documents for your claims and then the lender would do the math.
Generally, it is seen that you are likely to get it within a couple of weeks.
If you are not a seasonal buyer and entered the market for the first time, then getting a pre approval would be extremely fruitful. You would get a fair idea that what apartment you may look for an amount you can manage.
However, for the sake of buying a home, a serious buyer shall get a pre approval. The only issue with it is that you would have to take a little pain and provide your financial information to a lender and wait for some days. But once you get the approval letter, you would have an edge over your competitors as it reflects your readiness for purchasing a property.
Pre qualification is not as accurate as pre approval as buyers do not need to share such information with the lenders. Or chances are you might end up giving wrong information, accidentally, like you assumed your credit score is more than 650 while in reality, it might be below that. Because of these reasons, pre qualification does not provide accurate information.
If we talk about the pre approval, it is more authentic than pre qualification as lenders take great pain in assessing your financial history and reaching your current worth. The more information lenders seek, the more accurate it is going to be.
With that being said, you are going to know your exact amount when you will apply for a home. The lender will conduct the research for the desired home and let you know if you qualify for the mortgage to buy the home or not?
To get your pre approval, lenders take a precautionary approach and look into details thoroughly. They might ask for additional information during the process so you shall stay prepared for surprises and provide sufficient information when asked.
To work with any real estate agent, it is always the best idea to get your pre approval done. Most of the time, it is an agent who is serious buyers to get approval so they can make a convincing case for the buyer. They also want to ensure that their time or the seller’s time is not wasted.
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