Pre-Qualified and Pre-Approved Borrowers
Taking out a
first
time loan, or refinancing a current
mortgage
loan is going to require an ample amount of time,
energy and of course
paperwork!
Mortgages can be a very difficult thing to navigate through,
but there are a few things that will make this process
a lot easier.
Being a pre-qualified or pre-approved borrower can make
applying
for a mortgage a lot easier and actually save you
a lot of money in the long run.
The article, “Pre-Qualified and Pre-Approved Borrowers
have an edge,” posted on Bankrate.com on May 1,
2006, demonstrates the importance of these two terms in
the mortgage process.
“If you
plan
to buy a home, the first step is to determine how
much house you can afford, and then to start shopping
for a mortgage. Your goal is to get pre-qualified or,
better yet, pre-approved. Once you have done that, you
can start shopping in earnest for a home.
“By getting pre-qualified or pre-approved for a
mortgage, you will have negotiating leverage because the
seller knows that you already have a loan virtually in
your pocket. And you won't be tempted to buy an unaffordable
house.”
Getting pre-qualified or pre-approved means that the lender
already has faith in you that you are going to repay the
loan, and this improves your chances for getting the best
loan possible.
So now you probably want to know what exactly these two
terms mean and how you go about getting pre-qualified
or pre-approved.
Getting a pre-qualification essentially means that the
lender has checked out your personal and financial information
and has deemed you suitable for receiving a loan.
“Prequalification acts as a dry run of the loan
application process. The mortgage lender will use details
you provide about your credit, income, assets and debts
to arrive at an estimate of how much mortgage you can
afford. The whole process may take only minutes, or a
few hours at most, and is usually free. While a "pre-qual"
is nonbinding to the lender (because the information you
provide has not been verified), it does serve as a good
indication to potential sellers of your general creditworthiness.”
As for pre-approval, this is basically taking pre-qualification
one step further in the loan process.
“The lender will contact your employer, your bank
and others to verify your income, assets, debts and credit
history, and then issue you a letter stating that your
mortgage is approved for a certain amount within a certain
time. You may be charged a small fee to cover the cost
of your credit reports and your application, often refunded
at closing.”
There are obviously various advantages to getting pre-qualified
or pre-approved but there are two very important reasons
that the author states as being most influential in getting
a mortgage.
“You're more attractive to sellers, who needn't
worry that they'll accept your offer only to have your
loan turned down, and you'll save time closing when you
find a home because the lender will have already completed
the necessary qualifying and underwriting steps.”