“Why do I need to be prequalified for a loan?”
When buying a home, you want to represent yourself and your offer in the best light possible. Depending on your area’s real estate market, sellers are usually interested in accepting offers at or above asking price. Additionally, many sellers want to be sure that you are qualified to purchase the home, meaning your home loan financing has been secured. It is hard to be a serious contender in a house sale when you are not pre-approved for financing. In addition to pre-approval, lenders can also pre-qualify.
Pre-Qualification
Most lenders will simply run your credit and gather some basic information so as to provide you with a pre-qualification letter. This pre-qualification letter does not secure your financing, however. It is a preliminary approval subject to the verification of your assets and credit. A pre-qualification letter will not give you the leverage you need to get your offer accepted, but it is a step in the right direction.
Pre-Approval
Lenders can also “by-pass” the pre-qualification step and simply process your loan application. By processing your loan application up-front, you can get your loan pre-approved and secure your financing. This is what is needed to make an offer on a home that will be taken seriously by a seller.
The pre-approval process includes:
- Gathering all of the documents needed to:
- Evaluate your credit
- Verify your employment and assets
After the proper documentation is gathered, we will:
- Submit the file to underwriting
- Identify and address potential challenges
- And finally, issue a formal intent to loan the funds
From the seller’s perspective, an offer with a pre-approved loan is as good as cash and will strengthen your offers above other interested buyers.