Two of the most important steps when purchasing or financing a home are applying for pre-qualification and pre-approval. Not only are these essential to the home buying process, it’s important to understand how they differ which we’ve explained as follows:
Mortgage Pre-Qualification
This is the lender’s estimate of the amount they think you’ll be eligible to borrow. This will give you a better idea of the price range you should be exploring at when searching for a home. Just keep in mind that pre-qualification doesn’t guarantee getting a loan. The lender is simply showing the amount that you could be approved for provided that everything checks out. Pre-qualification is just a snapshot of your finances and gives you a better idea of how much mortgage you might be eligible or qualified for.
Mortgage pre-approval
This is the next step in the process. This means that the lender has researched your financial history in-depth and determined that you’ve qualified for a specific amount. The lender will give you a written conditional commitment for an exact amount thereby putting you in a stronger position to negotiate. Some examples of the information you’ll need to provide the lender include:
- bank account statements
- credit information
- monthly expenses
- place of residence
- proof of employment
- proof of income
- tax documents
Basically, the lender’s pre-approval document is the next step towards home ownership and is based on an underwriter’s review of the above information. At this point, your loan is contingent of the appraisal of the home you’re interested in providing there are no changes to your financial position prior to closing.
Why is Pre-Approval better?
While the main advantage of pre-qualification is knowing what you can afford prior to starting your search for a home, getting pre-approved gives you negotiating power with the seller and enables a quicker financing process. When your offer is reliable, it stands out from others that the seller has gotten. Pre-approval provides the advantage of having the edge over other buyers that are looking at the same home. Although the pre-qualification stage gives you a better idea of the amount the lender is willing to finance, the pre-approval letter tells the seller you can back up your offer with cash.
Buying a home, especially if it’s your first one, is an exciting experience but it can also be a stressful one. Let us show you how easy it can be with the proper qualifications. For additional information, contact Liberty Capital Services at (614) 505-0620 or if you prefer, visit our website today. Our business representatives are available to clarify your doubts and can assist you as needed so that you can make a sound real estate investment.
