Are you pre-qualified or pre-approved for a purchase loan?
Most people don't know the difference between a Pre-qualification and a Pre-Approval. As a top Mckinney Texas mortgage lender, we feel you should know the difference. It could mean the difference between winning that competitive bid or being beat out by a buyer that was wise enough to complete the most important step - full Pre-Approval. Before you begin to shop for a new home, you should set up a time to meet with me so we can figure out how much you can afford. This will put you in a better position as a buyer. That’s when it is important to understand the distinction between being pre-qualified for a home loan and pre-approved for a home 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 home loan, lenders will collect information about your debt, income, and assets. They 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. They will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow based upon unverified information.
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. The real estate market is currently so active that great homes sell quickly. Many sellers will not even entertain your offer without a full approval.
Getting pre-approved for a home loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a home loan for a specified amount.
To get pre-approved, you will complete a mortgage application and provide the lender with various documents verifying your employment, assets and financial status such as pay stubs, W-2 and complete tax return forms, bank statements and retirement accounts. The lender will review your mortgage options and submit your application to the underwriter for review. Once the application and underwriting 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. You are not bound to this offer and it does not mean you have to purchase any particular home.
The Richard Woodward Team does offer a free pre-approval with complete verification of your documentation. This gives you peace of mind knowing that you will have no surprises at the end of your purchase transaction. I will provide you with a step by step process chart and keep in informed at every step with our "In Process" status updates.