Mortgage Terms 101: Pre-approval
The timing and coordination of buying and selling a home can be a delicate balance. If you’re a savvy buyer who has been down this road before, you may know many tricks of the trade to stand out from a competitive crowd. One gold standard to help with this is being pre-approved by a lender.
A Serious Buyer
Having a formal letter of pre-approval is like having the upper hand in a negotiation. It shows the seller that you’re a serious buyer who has done the necessary due-diligence to purchase a home.
Sooner Rather Than Later
When purchasing a home, you’ll want to begin the pre-approval process at least 30 days before you start house hunting. A qualified lender will request a variety of documentation to issue a pre-approval letter. The documentation/information the lender requests gives them a picture of your CIA.
- C stands for credit – understanding your credit history and your current obligations
- I stands for income – determining if your monthly income will take care of the monthly mortgage payment
- A stands for assets – knowing you have sufficient funds for the down payment, closing costs, and pre-paid items
So you’re prepared, here’s a helpful mortgage checklist that details the items most commonly requested.
Pre-approval vs. Pre-qualification
Be careful to not confuse a pre-approval with a pre-qualification. Lenders might loosely use the term pre-qualified which doesn’t guarantee a loan, it simply allows the lender to look at whatever information you share with them to determine the likelihood you could qualify for a loan. Most real estate agents and smart sellers will know the difference, so be sure you obtain a pre-approval to present a strong offer to a seller.
Having a pre-approval letter before you start house hunting can save you time during the negotiation process and expedite your loan closing too!
If you’d like to speak with one of our mortgage consultants about the pre-approval process, please feel free to contact us today to get started. During the home financing process, you’ll need to complete and submit this paperwork anyway, and doing it ahead of time is a great place to start!