In the past, buyers would go house shopping and when they had found their dream
home, then they went to get pre-approved. However, in today's market, that has proven
to be one of the least effective methods in purchasing a 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
a mortgage that is right for you. 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, and
mortgage brokers.
Be sure to choose a lender who is knowledable of interest rates, closing costs,
and different mortgage plans that may be more structured for your personal needs
and finances. Check with friends, real estate agents, and co-workers to see their
past experiences with home-lenders.
