It used
to be that buyers could go house shopping and when they have found their dream
home, then they go to get pre-approved. However, in today’s market, that has
proven to be one of the least effective methods in landing the dream home.
Most
lenders can pre-qualify you for a mortgage over the phone. Based on general
questions about your income, debt, assets, and credit history, lenders can
estimate how much mortgage you qualify for. However, being pre-qualified and
pre-approved are different things. Pre-approval means that you have applied for
a mortgage; you have filled out the mortgage application, received your credit
report, and verified your employment, assets, etc. When you are pre-approved,
you know exactly what the maximum loan amount will be.
A
pre-qualified letter is not verified and in essence, does not count for much if
you are competing with other buyers who are pre-approved. When you are
pre-approved, you and the seller know exactly how much house you can afford. It
gives you credibility as an interested buyer and lets the seller know
immediately that you will qualify for a loan to buy their property.
In
addition to being pre-approved, it’s important to be pre-approved with a
legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit
unions, savings and loan associations, mortgage brokers, and online lenders.
Some
lenders to avoid: those who lose a form or misplace a file, those who gather
information from you in an unorganized manner, those who are not informed about
interest rates, points or costs, and those who cannot provide you with the
right information.