Why Should I Get Pre-Approved for a Mortgage?
By getting pre-approved you’ll be able to know exactly what price range you qualify for and what type of mortgage will accommodate your budget. Why would you ever consider making one of the most important decisions of your life without first being prepared to follow through with it? With a solid pre-approval you put yourself in a strong negotiating position. In the overwhelming majority of cases where mortgage financing is required, a seller will require that a pre-approval letter accompany any offer to purchase a home. Sellers want to know that you have the resources to make good on your offer to purchase the home. With the pre-approval in hand, a realtor is better prepared to help you make an offer when the time comes.
What is the Difference Between Pre-Approval and Pre-Qualification?
These terms are often used interchangeably. A pre-approval letter holds more weight in real estate negotiations because it is a more thorough evaluation by the mortgage bank concerning your credit-worthiness. A pre-approval typically involves a mortgage originator reviewing your tri-merge credit report, taking a full mortgage application and securing an approval through automated or manual underwriting. An even better form of the pre-approval letter (commitment letter) includes verification of employment, income and assets.
A pre-qualification letter is often not worth the paper that it is printed on. The mortgage lender makes no guarantees concerning their qualification because a full underwriting analysis is not completed. Often credit is not checked and information is not verified.
To insure that you are capable of closing on a mortgage, request a pre-approval letter signed by an underwriter who has pulled credit, taken a full application and verified employment, income and assets!