Last week, we talked about buying a home. We briefly skimmed over the subject of getting pre-approved for a loan before you go and search for homes. This is a very important step before searching for homes because it's easier to search for homes in your price range if you are pre-approved for a certain loan. So, how do you get pre-approved for a loan? Take a look at the steps below to find out how!
First, let's discuss the difference between being pre-qualified for a loan and being pre-approved for a loan. A mortgage pre-qualification is an informal process where it’s more of an automated underwriting where you are questioned about your assets, income, and expenses. It only gives you a general idea of the price range you can afford, but it doesn't get you any closer to securing a mortgage and it's not verified.
A pre-approval, on the other hand, means a lender has determined how much you can borrow, the loan programs that you may qualify for, as well as the interest rate you qualify for. A pre-approval letter also helps you prove to real estate agents and sellers that you’re a credible buyer and able to act fast when you find the home you want to buy. When a home is under contract, it’s important to be fully approved to move forward with buying a home.
A lender will generally start by asking for some basic information about you and your financial history. Pre-approvals are much more valuable because this means the lender has actually checked your credit and verified your documentation to approve a specific loan amount.
But wait! What is a lender? How are they going to help me? Why is that more important? A lender is an individual, a public or private group, or a financial institution that makes funds available to buyers with the expectation that the funds will be repaid. Lenders will interview buyers thoroughly to make sure they are available to receive a loan for purchasing large investments. They will ask questions on important facts when it comes to buying a home.
Make sure you're working with a good lender! They will ask you questions about to give you an accurate mortgage quote, communicate with you, take the time to explain what loan options mean by explaining it in layperson terms, be prompt and constantly problem-solving, and works within your price range always. It’s also important to work with a local lender rather than an online lender.
Receiving a pre-approval letter is pretty crucial in today's real estate market. So, it's important for all buyers to understand the process of working with lenders to approve a loan for you to buy a home.
We at The Swede Team have wonderful lenders that we work with that will help to pre-approve future buyers. Contact The Swede Team to learn more about how we can help you buy a home and get in contact with our fantastic lenders to learn more information on buying a home.
Like what you're reading? Click here to subscribe to our blog!
Thinking about buying a home? Click here to call Howard and learn how The Swede Team can help you find your dream home!