Today we’ll be discussing the four reasons why a potential buyer should obtain a pre-approval. Shopping for a home without a pre-approval is like walking into a grocery store without a wallet.
These are the main differences between a pre-qualification and a pre-approval: A pre-qualification is when the lender relies on the information provided by the buyer to estimate how much the borrower can qualify for. A pre-approval is when the lender verifies the borrower’s information and documentation to determine exactly how much they’d be willing to lend to the borrower.
There are four essential reasons why you should get a mortgage pre-approval.
- The market is competitive. Buyers are often eager to start looking at homes and tend to leave what they view as the boring part of the home buying process for last. In this competitive market, any serious buyer should pursue a pre-approval from a lender in advance to begin their home search.
2. No pre-approval, no accepted offer. It’s common to come across buyers who skip the pre-approval process, but in order to get your offer accepted, you have to have a real pre-approval wherein the lender has verified not just your credit, but also your bank statements, tax returns, and pay stubs.
3. You need to know where you stand. Some buyers put off the loan application process because they fear that the lender may not approve them for the amount that they plan to spend to buy a house. It’s like when people don’t go to the doctor for their annual checkup because they’re afraid to find out what’s wrong with them.
4. Loved ones can’t approve you for a loan. It’s typical for potential buyers to assume that they can qualify for a certain mortgage amount based on what a neighbor, friend, or relative qualified for. A survey by NeighborWorks America found that nearly four out of 10 people who are thinking of buying a home first seek advice from friends and family who own a home. Only 16% say they approach a real estate agent for advice in the early stage, and mortgage lenders are approached only 9% of the time.
I hope this helps you better understand the importance of a pre-approval versus a pre-qualification.
If you’re interested in knowing what is required to obtain a pre-approval, please feel free to message me and I can provide you with a list of qualified, trusted lenders. I would be happy to help you!