Pre-Qualification and Pre-Approval: Slow Home Buying Process

Pre-Qualification and Pre-Approval

What is Pre-Qualification and Pre-Approval?

The pre-qualification and pre-approval process is the difference between a quick and a slow home buying process. To get pre-qualified for a home loan you simply have to give a lender enough information about yourself to cover maybe 5 to 20 different questions. They do this kind of quick initial screening to make sure they do not waste their time. They do not want to waste their time with people who are not qualified to purchase a home. Keep in mind that a pre-qualification for a home loan does not mean you have a guaranteed loan. There are different loan programs available, each requiring different levels and amounts of down payment money, credit, and income. But the basic difference between a pre-qualification and pre-approval is the amount of money the lender is willing to loan, the level of risk, and the terms and conditions.

The lender will make sure they do not loan you more than they can afford

If a lender knows exactly what they are doing, if they see you not being able to afford the home they want to give you financing, they will not give you more money. So the lender spent a medical check, you told them yes, they then spent another $100 to run your credit report, they checked your income, they then ran another credit report, and they told you you are not likely to get the loan. Why would you pass up a home that costs $ ninja shortcuts? You want to see who they are and what it will take for you to have a good handle on the situation, nothing is for free.

You want to be sure you qualify so they are not taking on a liability

The next level of pre-qualification is to find out the type of loan you have (Conventional or Government) What type of interest rate are they charging? What size monthly payments can you pay? If this new home loan you are getting a pre-approval for pays $1000 per month, but you only see an annual property tax bill of $2000, am I being a European, or am I buying the house out of the Now Garden Land? What if you find out right after closing that you are actually living in the house? How are you going to pay the requested taxes on your way of becoming a homeowner? precious time wasted?

You want to cross all your “T”s and dot all your “I”s

Moving on to the fun stuff, do the work required to get a good pre-approval from the lender. Assemble your income and asset documents together. Keep these together, so you remember what they are. When you talk to a lender you are focused on the loan application, the negotiator could care less about the paperwork. But get them to admit you are a qualified buyer. Make them talk about the loan, about how you are qualified. This will save them a lot of time and give you an advantage in negotiations. And let everyone know you are a very qualified buyer able to close quickly.

A pre-approval is a letter from a lender acceptable in a short amount of time. The lender has taken the extra time to generate this document because they are informing you it is necessary to purchase has you be qualified. Since so many others have a pre-approval, the seller is fairly aware that if a deal gets multiple offers it is likely to sell.

As you think about it, you do not pay anything for the pre-approval, they did the work and they will provide that document to the seller once they realize you are a serious serious shopper.

Pre-approval letter

The pre-approval letter is not necessarily your final approval. The lender often writers a few conditions to the pre-approval that may cause the letter to be not as good as it first seemed. They are a business, but they are not good at complicated loan processes. And if they work with anybody who has not pre-approved, they know they are going to get frustrated. I have heard of business closing even before all documents were received. I have also seen situations where the pre-approval was delayed because the lender had a problem writing the conditions and as a result, they lost the deal. So be sure that pre-approval is not a long drawn out process.

They want to know you have great credit, funds are available to buy, and that they can trust you. It is no longer lady luck. You are now a sophisticated shopper as we all are. So treat your pre-approval as you would a wedding ring. It all has to be right.

Choose the right company, good experience and outrageous sales will get you through all hurdles, however, if you need experience check out your lender.