Many home buyers ask, “Do I really need a mortgage pre-approval before I start my home search?” The answer: YES! Whether you’re a first-time home buyer or have purchased multiple homes in the past, before you start your new home search, always get your mortgage pre-approval lined up first.
Why? Imagine spending weeks viewing homes. Finally, after an exhaustive search, you find the perfect home that both you and your significant other agree on. Your imagination is going wild with how you’ll decorate it and the many family gatherings you’ll have there. You tell your family and friends about this amazing new home, and everyone is excited for you. You’re already planning the house warming party. But when you apply for financing, you learn that you don’t qualify for the mortgage. In fact, the home is more than $100,000 higher than what any lender will approve you for. Defeated and saddened, you begin the home search all over again.
You can avoid this scenario when you make getting a mortgage pre-approval your first step in the home buying process.
Mortgage Pre-Approval Versus Pre-Qualification
Realize there’s a big difference between being pre-qualified and being pre-approved. Many home buyers think these terms are interchangeable, but they are not.
Pre-qualification means you have supplied a lender with some basic information, such as your income, debts, and assets. You may have given the details via phone or on an online form. Everything is based solely on what you tell the lender, as there’s no verification or credit pull. Since nothing is verified, your pre-qualification amount is likely to change, and it may be given verbally as a price range rather than an exact amount.
Pre-approval, on the other hand, means you have gone a step further. You have completed a mortgage application, paid any applicable fees, supplied documentation to prove your income, and have authorized a credit report be pulled. Because you’ve given the lender permission to review and verify your information, your pre-approval amount is often in writing and for an exact amount that isn’t likely to change.
Tip: While pre-qualification is a good start, being pre-approved will make your home buying search more productive and often less stressful.
Need advice on getting a mortgage pre-approval? Already have your pre-approval letter? Either way, we can help. Contact us today!