Before you buy, its always best to have a plan. The best Real Estate Experts will always tell you that before you go house hunting the absolute first thing is to do is apply for a loan.

PRE-QUALIFIED vs. PRE-APPROVED

Pre-Qualified: Typically your Lender will ask you about your current financial position and debts and give you an estimate that you could be qualified for.

Pre-Approved: This process is more involved. Your Lender will have you fill out a mortgage application with more detailed questions and submission of financial documents for a credit check. From this application, your will tell you a more specific mortgage amount you will be qualified for.

From the above, it is far better to be pre-approved for a loan. There are also more advantages to being pre-approved for a mortgage, such as:

  • Save Time by Looking at the Right Homes – Your Real Estate Agent can send you automatic emails for Multiple Listing Services (MLS) listings that are within your qualified and pre-approved ranges. With a pre-approved mortgage,  your Real Estate Agent can focus on the areas and prices that are best for you, instead of wasting your time taking you to just out of reach properties.
  • Spend More Time Examining the Right Homes – By limiting the parameters of pricing, you can spend more time focusing on properties that fit within your desired criteria and/or preferences. This way you can decide if a backyard is more important than a garage or driveway, or decide if you really want a detached home with nothing vs a semi-detached with everything.
  • Gain Confidence & Avoid Disillusionment – As the old saying goes “You know when you know“, so when you do find your perfect home, you know that your are qualified to buy it and no one can say otherwise. Getting pre-approved takes out a lot of the risk and anxiety of buying without knowing if you are pre-approved and able to buy the property.
  • Increase Bargaining & Negotiating Power – The less conditions you can out in your offer, the more likely the Sellers will immediately accept your offer, (even if that offer is for less than list price in this crazy market, it happens) because you can give give the seller peace of mind that their home is sold.
  • Enjoy a Faster Closing Period – Since there is no longer a period while your loan application is processed, your lender can speed up the entire processing procedure. Appraisals can be ordered immediately. Therefore it’s possible to shorter closing period from a 30-day closing period to two or three weeks, which makes your offer more attractive. Your offer will move to the front of the pack if you can accomplish the seller’s need to quickly close.

Because mortgage approval is generally the longest contingency to satisfy in a purchase contract, it is to your advantage to obtain a pre-approval letter as soon as you’re ready to begin your search. Lenders will render a decision based on your complete loan application, employment verification and data from all three credit reports.