Prequalification vs. Preapproval: The first steps to getting you into the home of your dreams!

 Prequalification vs. Preapproval: The first steps to getting you into the home of your dreams!

Purchasing your own home is a goal for many people. But if you haven't purchased a home before, or maybe haven't purchased a home in a long while, it's important to keep the first thing the first thing and understand HOW you will be purchasing your home. For the vast majority of people, they will be purchasing their home with a home loan or mortgage. Yes, I know all about those online calculators that tell you how much home you can afford, but I am here to tell you - it's so important to speak with a good lender. The information you can gain from them is more valuable than most people realize. 

When you start the home searching process you will often hear about preapproval or prequalification or you may here both terms used interchangeably. These words mean very different things when it comes to your ability to actually purchase a home. So understanding the difference is important. 

Prequalification

I use the word "quick" to help me remember what Prequalification means. A prequalification can be done more quickly than a preapproval. Many lenders these days have apps or an online portal where the client can quickly enter basic information, this information along with a quick phone call to a lender can give you a prequalification number. This dollar amount will estimate what you can afford in your home search and your lender will be able to estimate your monthly payments to help you make decisions about how much your are able (or want) to spend on your home. This initial discussion can also help clients decide if now is the time or if they would prefer to wait a bit longer to; save more, pay off more debt, etc. to be able to afford something more expensive. Also worth noting, your Realtor® will need a lot of this information that you will get from your lender to fill out the offer contract should you decide to purchase. 

Preapproval

Well, once I learned the "quick" trick to help me remember the meaning of prequalification remembering what Preapproval means was easier. Prequalification does NOT guarantee the ability of the client to actually get approved, it just provides an appropriate search range for the client. Preapproval will result in a conditional preapproval letter from your lender. The lender will have pulled all credit reports and history, employment information, proof of debts, etc. The depth of information in the preapproval does mean the process takes a bit longer than prequalification, but most lenders I know can get the preapproval done in a pretty timely manner once they have all of the information and documents from the buyer. You Realtor® and your Lender will work closely to make sure the offer contract 

What Realtors know...

No prequalification leads to disappointment. If you don't start that conversation with a lender before you go look at homes you stand a good chance of being disappointed in the whole process. Let's say you see a home that is priced at $400,000 and it's "perfect"! You just have to see the inside! So we schedule a showing and go look and you are READY! You call your lender. While you've got a great job that pays well, you still have student loans or maybe some medical debt, car payments or other expenses. Your lender tells you that you could qualify for a loan of up to $300,000. This "perfect" home is now out of your still pretty good price range (especially in this area). We go look at homes that are in your price range, but they are all now compared to that "perfect" home you saw before you spoke to your lender. 

Preapprovals = POWER. While you don't "have to" have any of this information to submit an offer on a home, sellers do not "have to" accept your offer either. Especially in a strong real estate market, having a preapproval letter will make your offer on a property MUCH more likely to even be considered. If it is a multiple offer situation you likely won't stand a chance against other offers without a preapproval letter. 

If you need to know about buying a home or getting in touch with a great mortgage lender let me know! I am here to help!

Michelle@TM5Properties.com



Comments

Post a Comment

Popular posts from this blog

Is your home prepared for a freeze?

Image
  We don't usually get "real" Winters in this area. If we dip below freezing over night it's usually just one night here & there during the Winter months. We rarely see snow and can go years without the worry of ice on the roads. This year is NOT that year. We've already seen a FULL day of snow that stuck, you could still see snowmen up to four days later. But that week was no where near as cold as the coming week is looking to get! With temperatures struggling to get above freezing for close to a week it's good to be prepared.  Stock up on necessities. You don't want to have to brave potentially ice covered roads to get to the grocery store or pharmacy. If you have prescriptions to pick up or need to plan for meals for a few days do that in advance of the winter blast that is coming. You may even want to plan for kids to potentially be home for a few days as here in the Southern states schools will often close if the roads become unsafe.  Keep your h
Read more

Creating your Home Office

Image
Creating your Home Office In recent months many (if not most) of us have found ourselves working much more from home. The fact is that none of us really knows if we might need to be able to work from home again in the future (ie. the Fall), but there are a host of reasons why anyone could need to work from home. There are definitely some pros and cons to working from home. There are also things that we can do to make the most of the pros & minimize the cons to make for an effective work day at home. Of course, having the office to actually GO to is nice. I don't even use a dedicated "office" at my office. I use the open spaces and love interacting with my coworkers. But just being there gives me more energy and more focus. Some will say that working from home is better for them; they struggle with distractions at the office and may be more creative at home. Neither is wrong but let's look at some ways to make the home office really work for us. What kind of space
Read more