Pre-qualification means that a lender has evaluated your creditworthiness and has decided that you probably will be eligible for a loan up to a certain amount.
But here’s the rub: Most often, the pre-qualification letter is anapproximation—not a promise—based solely on the information you give the lender and its evaluation of your financial prospects.
“The analysis is based on the information that you have provided,” saysDavid Reiss, a professor at the Brooklyn Law School and a real estate law expert. “It may not take into account your current credit report, and it does not look past the statements you have made about your income, assets, and liabilities.”
A pre-qualification is merely a financial snapshot that gives you an idea of the mortgage you might qualify for.
“It can be helpful if you are completely unaware what your current financial position will support regarding a mortgage amount,” saysKyle Winkfield, managing partner of O’Dell, Winkfield, Roseman, and Shipp, in Washington, DC. “It certainly helps if you are just beginning the process of looking to buy a house.”
Why is mortgage pre-approval better?
A pre-approval letter is the real deal, a statement from a lender that you qualify for a specific mortgage amount based on an underwriter’s review of all of your financial information: credit report, pay stubs, bank statement, salary, assets, and obligations.
Pre-approval should mean your loan is contingent only on the appraisal of the home you choose, providing that nothing changes in your financial picture before closing.
“This makes you as close to a cash buyer as you can be and gives you a huge advantage in a competitive market,” saysLea Lea Brown, a vice president and mortgage banker with Atlanta-basedPrivatePlus Mortgage.
In fact, pre-approval letters paired with clean contracts without tons of contingencies have won bidding wars against all-cash offers, Brown says.
“The reliability and simplicity of your offer stand out over other offers,” Brown says. “And pre-approval can give you that reliability edge.”
So take notice, potential home buyers. While pre-qualification can be helpful in determining how much a lender is willing to give you, a pre-approval letter will make a stronger impression on sellers and let them know you have the cash to back up an offer.
Author:Donna Schuck Phone: 386-295-3426 Dated: February 16th 2018 Views: 1,229 About Donna: ...
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