Get Pre-Approved

Few things are more frustrating in a new home search than falling in love with a house that simply doesn’t fit your budget. So before you begin looking for a new home, work with a mortgage company to learn more about how to get pre-qualified and pre-approved. (And be sure you understand the differences between these seemingly similar terms.)

Pre-qualification – Starting with this step is easy and it provides you with an estimate of how much financing you might be eligible for. Then you can talk with Steve so he can select homes that fit both your preferences and your price range.

If you’ve never been pre-approved before, you might be surprised at how big the estimate for your loan is. While pre-qualification is a good guideline, it’s just that – a guideline. You’ll also need to look closely at your monthly income and expenses. Consider whether your future mortgage payment will fit comfortably into your budget; and don’t feel it’s necessary to spend the full amount for which you’ve been pre-qualified. A good rule of thumb is that your mortgage payment should be no more than 25 to 33 percent of your monthly gross income.

Once you’ve determined your price range, you can also apply for a pre-approved loan. Often a seamless step, being pre-approved can be the advantage you need if you’re bidding against another buyer who isn’t. Pre-approval also speeds the actual loan process once you’re in contract with a particular property.

Here’s some additional information to explain the differences between pre-qualification and pre-approval of your loan:

Pre-Qualification

• Is based on preliminary information regarding your income, debts and assets.
• You usually provide information verbally to the lender.
• An in-file credit report may or may not be reviewed.
• Once a purchase agreement is executed, you must complete a loan application.
• There’s no fee.

Pre-Approval

• You provide documentation of income, debts and assets.
• Your loan application is completed.
• The information you provide is verified and an underwriter approves the loan.
• There’s no need to complete an application once the purchase agreement is executed because it’s already done.
• You may be required to make a deposit on closing costs.
• Your mortgage loan is approved, pending an appraisal of the home.