Better to be preapproved than prequalified for a mortgage
Tis’ better to be pre-approved than pre-qualified for a loan.
Getting pre-qualified by a lender for a mortgage is an informal process where a broker asks you some simple questions regarding your debts, assets and credit score and comes up with a ballpark loan maximum for you. However, when you get get pre-approved for a mortgage, you must fill out a loan application and provide the required supporting documentation. Assuming you qualify for a mortgage, the mortgage broker will commit to you in writing the amount you can borrow, i.e. give you a pre-approval letter.
Get pre-approved for a mortgage BEFORE starting to look for homes!
Pre-approval for a home loan has a number of advantages:
• Many Seattle Realtors will only work with buyers who have been pre-approved. By getting pre-approved, you are demonstrating that you are serious about looking for a home. Your Realtor wants to know if you can actually afford those $1.5 million homes they has been showing you for the past six months.
• You will know exactly how much you can afford and can base your home search on that value. There’s nothing worse than looking at homes in the $500,000 range only to later find out that you can only get approved for a $350,000 loan.
• If you are competing with other buyers in a hot seller’s market and you are the only one who has bothered to get pre-approved for a mortgage, you will have an advantage.
Difference between being pre-pproval for a mortgage versus applying for a mortgage and being approved.
Note that getting pre-approved does not automatically mean that you will get a mortgage for a particular property. Once you make an offer on a home and have a written agreement with the seller to buy that home (contract and mutual acceptance) then you will apply to the lender for a mortgage for that specific property. The lender will want to take a number of factors into consideration including the current market value of the home. The lender will have you pay for an appraisal.
For condos, they will want to look at the financial health of the association including cash reserves, what percentage of units are owner occupied and what percentage of owners are up to date with their monthly homeowner association dues. Every property is different and the lender will want to make sure they are not making a risky loan to you…not that they cared too much in the crazy easy money days of 2003 to 2007!
Approved for the home loan and all clear to close!
Once the lender has looked at all your finances and the property that you are hoping to buy buy and OK’s everything, then you are said to be approved for the loan and can close on the property! More on that in the escrow and closing step. But first things first…..
