Applying for a loan and obtaining approval before a buyer finds a home they want to buy can be a distinct advantage. Making a loan application is going to be necessary eventually anyway unless they are going to pay cash for the home.
Pre-qualification is a procedure where you get an opinion from a mortgage officer about how much you qualify for. In the process, any obvious difficulties that might cause problems might be discovered. This process is always recommended but it doesn’t have the advantages of a pre-approval.
Pre-approval requires a complete application with credit reports and verifications. The Mortgage Company will issue a commitment subject to a specific interest rate and points and a satisfactory appraisal when the property is identified.
Time limits are usually placed on pre-approval commitments. It is recommended that you be ready to look at homes and make a decision after you receive your pre-approval commitment.
The advantages of being pre-approved are:
- Looking at the right-priced homes.
- Avoiding disappointment in deciding on a home that you can’t afford.
- Saving money with a seller who is confident about taking their home off the market with buyers who have a definite loan commitment.
- One less contingency that the seller will be concerned with to get their home sold.
- Closing more quickly. Pre-approval ensures that formal approval process completes smoothly.
- Minimizing the anxiety of not knowing whether or not you qualify.
- Determine which loan program best fits your needs.
- Interest rate can be locked in, making it easier to budget.
- You will know exactly what closing costs and down payment will be.
- First time buyers may qualify for special programs which will allow you to afford more home for your money.