So you’re ready to buy a home!
You’ve made the decision and now it’s time to actively go out an look at homes for sale. As you browse online and choose the homes that fit your critera – there’s one important thing that you can’t leave out….getting pre-approved for a mortgage.
Even though you have come up with a price range that’s within your budget, it does not mean that the bank will lend you that amount. So what do you do? You’ll want to get pre-qualified and ultimately pre-approved for a mortgage. So what’s the difference.
Getting pre-qualified is the initial step in the mortgage process, and it’s generally fairly simple. You supply a bank or lender with your overall financial picture, including your debt, income and assets. After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify. Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.
A pre-qualification is not a sure thing; it’s just the amount for which you might expect to be approved. Getting pre-approved is the next step, and it tends to be much more involved.
With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. A pre-approval puts you at an advantage when dealing with a potential seller, as he or she will know you’re one step closer to obtaining an actual mortgage.
Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place. When you make an offer, it won’t be contingent on obtaining financing, which can save you valuable time. In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing out to another potential buyer who already has financing arranged.
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