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Pre-Approval
Pre-Qualify Before You Buy | Why Get Pre-Approved | Pre-Approval vs. Pre-Qualification
Before you begin searching for a home, you need to determine how much home you can afford. You may be able to afford more or even less than you think. The lender is willing to loan you money based on your income and the amount of down payment you have.
By becoming prequalified before looking for a home, you'll save yourself time, energy and frustration because prequalification:
Determines How Much You Can Afford
Prequalification helps you avoid buying less home than you can afford or being disappointed if you don't qualify for as much as you thought.
Shows You What Your Down Payment Will Be You'll have a general idea of what your monthly principal, interest, taxes and insurance payment will be.
Identifies the Loan Programs You Qualify For
With the wide variety of loan programs available, it's important to know which types you qualify for and which will best suit your needs.
At this point, we can also help you determine alternatives and strategies that could help you buy the home of your dreams. These may include:
- Special First-Time Homebuyer Programs
- Co-mortgager Financing
- Low Down Payment Programs
To prequalify you, Cornerstone Mortgage Company will need to know the following:
- Your Employment History and Income
- Your Monthly Debts and Obligations
- The Amount and Source of Cash for Down Payment and Closing Costs
After completing our Free Mortgage Loan Analysis, which allows for a better understanding of your financial profile, your Loan Officer will discuss the different alternatives with you over the phone. When you are prequalified, we send you a prequalification letter to present when you make an offer on a house. The seller may be more likely to accept your contract because they know you are prequalified to buy their home.
Why Get Pre-Approved
It was only a few years ago that your agent's word was as good as gold regarding your ability to qualify for a home. All you had to do was give your agent or lender your financial information, they would do a few quick figures and presto, you could buy a house. These days, that "fly-by-the-seat-of-your-pants" financing doesn't work. Sellers are wiser and most are demanding that buyers are pre-approved.
So, what does pre-approval mean? And isn't being prequalified just as good? Both good questions and both are very confusing for most people. The first step is to be prequalified. Prequalification involves gathering financial information from you either verbally or via e-mail. Based on this information, you will know the loan amount you are prequalified for. Now, keep in mind, during the prequalification process: no verifications take place, no credit reports are pulled and no commitments are made. This is just a preliminary step in your homebuying process - to give you an estimate on how much home you could realistically afford.
The next step, and the most crucial in today's market, is to be pre-approved. You will complete a loan application and review the disclosures appropriate to your loan type. Most importantly, your assets, credit and income will be verified. With a pre-approval, your loan is underwritten and a commitment to lend is issued from Cornerstone Mortgage Company. All commitments are subject to an acceptable appraisal, title work and any conditions on your loan being met.
Don't worry, getting pre-approved isn't just to appease sellers. This process is also for your peace of mind. Rather than being disappointed down the road, you will know if you can obtain a mortgage. Buying a home can be stressful - obtaining a mortgage doesn't need to be!
Pre-approval is your tool to avoid any kinks in the financing!
Pre-Approval vs. Pre-Qualification
A pre-approval represents a powerful tool for you toward the purchase of that new home with a minimum of surprises and disappointments. It presents you as a "cash" buyer to the seller.
Anyone who wants to buy a home today should go to their lender first. The understanding of how much can be borrowed presently reduces the possibility of disappointment later. Your lender can provide guidance as to how to prepare and position later on for a home that is currently out of reach.
A realistic understanding of how much loan you can reasonably expect to qualify for is a good first step toward the goal of homeownership. And, a letter of pre-approval can be the mechanism that makes that happen. There is a distinct difference between a letter of prequalification and a letter of pre-approval, and it is important that you be aware of this distinction.
- Prequalification
- Prequalification means there has been loan calculation made that show how much you "may" be able to borrow. While prequalification can reduce the processing time for home loans, indicate how much house you can afford, and provide some leverage in bargaining power, it doesn't necessarily guarantee that such a loan will, in fact, be made by the lender.
- Pre-approval
- Pre-approval means you actually have a loan waiting, subject to finding the home and home appraising at the sales price. The pre-approval letter represents an actual commitment on the part of the lender. In order to secure such a letter, it is necessary to complete a formal loan application and pay the associated fees. Credit, salary and bank funds will be checked, and if the loan is a good investment, the lender will issue a pre-approval letter, which provides a commitment for a limited period of time, subject to a satisfactory property appraisal and title search.
