Shrewd home buyers become pre-approved for a mortgage loan before starting their home search. Educating yourself about real estate and lending terms is a smart step in becoming more comfortable during the home buying process. For example—two terms often interchanged incorrectly are “pre-qualified” and “pre-approved” as they relate to the mortgage lending process. There’s a big difference between the two and using them incorrectly can mean disappointment and disaster for you later
View being “pre-qualified” as the step before becoming “pre –approved” for a mortgage loan. Your lender will look at your finances from a bird’s eye view getting a general idea of your debts, income, and assets. After the lender reviews your information, they will give you an estimated amount of the loan value for which you may be approved. This is not an in-depth review of your financial history and should not be considered a guarantee of funding.
“Pre-approval” means your lender has evaluated your credit history and verified your income providing assurances you are able to obtain a home loan up to a certain dollar amount. It can be a lengthy process, but by the end of it, you will know whether or not you can buy a home. Being pre-approved is beneficial because you will know what houses you can afford and what houses you cannot saving you valuable time during the search process.
Lenders often supply a letter of pre-approval to be used when shopping for your first home. A letter of pre-approval is typically good only for a certain amount of time and should be kept up to date.
Your Old Dominion Realty real estate agent will encourage you to work with your lender to become pre-approved for a loan. It is to your advantage because it shows sellers are financially able to buy their house. Although it does not guarantee a seller will automatically accept your offer, it does increase your chances over potential home buyers without a letter of pre-approval. It will help to ensure you will not miss out on purchasing the home of your dreams.