Getting pre-approved is vital. It saves time and gives you instant credibility with the seller that you won’t be turned down for the loan.
The first step to buying a new home is calculating your finances to figure out your budget. This will give you a range of prices that you can begin to research. Before you are able to place a bid on the house of your choice, you can either be pre-qualified or pre-approved for a loan. If you are pre-approved you will have an advantage over those who are pre-qualified because your loan is approved for a certain amount. Sellers give priority to potential buyers who are pre-approved for a loan because they have completed more paperwork in the process of buying the home.
To become pre-qualified for a loan, your loan officer needs to collect some personal information. This information includes your annual income, any debt, and your assets. Your loan officer will help you choose the most appropriate loan program by analyzing your credit profile. Your loan officer will then create a pre-qualification letter stating the amount of money you are qualified to borrow. This letter is not a guaranteed lump sum of money. This letter reflects the amount of money that you are eligible to borrow. To be pre-approved, your loan officer needs additional paperwork.
The process of being pre-approved starts with you submitting a mortgage application to your loan officer. This application needs to be accompanied by an assortment of employment paperwork, financial status forms, credit card statements and bank records. Your loan officer will consider your mortgage options and locate a lender who matches your needs. Upon completion of the mortgage application, your lender will send you a pre-approval letter with the amount of money they will lend you for your home.
Even though being pre-approved is an advantage over pre-qualified, it is important to remember that your lender can audit your pre-approval letter under certain circumstances. If you loose your job or if the interest rates increase, your lender must reevaluate your situation to determine if your pre-approval amount will change.