3 essential reasons why a buyer should get pre approved
Shopping for a home before getting preapproved for a mortgage is the equivalent of walking into a grocery store without a wallet. Yet, many homebuyers don’t get a loan preapproval before the house hunt. So, what is a preapproval? For one, a preapproval is different from a prequalification.
Preapproval: The lender verifies the borrower’s information and documentation to determine exactly how much it would be willing to lend to that borrower.
Prequalification: The lender relies on information provided by the buyer to estimate how much the borrower could qualify for.
“The documents to get preapproved are the same documents that you would need to get a mortgage,
- Pay stubs.
- Last two years’ W-2s.
- Last two federal tax returns. (self employed)
- Two months’ worth of bank statements of all types of accounts.
- Your credit report.
A preapproval is not a loan commitment, but it helps speed up the underwriting and loan approval process. Going an additional step, I will run a automated (AUS) underwriting approval directly to obtain a VA, FHA, and Conventional Loan Approval based on the financial documents and credit report. This makes the pre approval letter pop when it accompanies an offer on a home.
Here are three reasons it’s better to get a mortgage preapproval before you go house hunting.
1. The competitive market
Buyers often are eager to start looking at homes and tend to leave what they view as the boring, bureaucratic part of the homebuying process for last.
“But in this competitive market, any serious buyer should pursue a preapproval from a lender in advance to beginning a home search.
2. No preapproval, no accepted offer
It is now really a requirement that a pre approval letter needs to accompany an offer to purchase a home. Nearly every Realtor and Seller will want to see this along with the offer to purchase a home. In many cases the pre approval letter is one of the main factors whether a seller accepts an offer. I am always willing to talk to the seller and listing agent to go over my clients pre approval to show their strengths.
3. You need to know where you stand
Many of my new buyers have an idea of what they can afford, but it is essential for them to know exactly what price range works best for them, keeping their budget in mind as well.
It is essential to provide the best loan program that is best for each buyer. The total payment calculation which includes Principal & Interest, Property Taxes, and Fire Insurance. Also, there may be special assessments on a property such as Mello Ross.
Also, this gives time to fix any unexpected, and, or repair some credit issues that may arise when the credit report is pulled; as lenders require a tri merge with three bureau’s reporting to obtain a home mortgage loan. This will also give time to boost credit scores with some buyers to obtain a lower interest rate on their loan.
Bottom line, the loan process goes much smoother with little to no surprises once I have pre approved a buyer.
I don’t charge any upfront cost for a pre approval letter, which includes the credit report.