mikamitchell

Get Pre-Approved For A Loan

Are you pre-qualified or pre-approved for a loan?

Before you begin to shop for a new home or refinance your current one, the very first step you should take is to find out how much you can borrow by meeting with a loan officer. This will save you heartache down the road, by knowing exactly the amount you can spend on a house. This will also put you in a better position if your refinancing your current home. The distinction between being pre-qualified for a loan and pre-approved for a loan is important to understand. The difference between the two terms will be crucial when you decide to make an offer on a house.

To get pre-qualified for a loan, loan officers will collect information about your debt, income, and assets. They will look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. They will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.

It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.

To get pre-approved, you will complete a mortgage application and provide the loan officer with various information verifying your employment, assets and financial status such as W-2 forms, bank records and credit card statements. They will review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.

A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase or refinance and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.

Be a smart buyer. As tempting as it is to start browsing all of those homes on the market these days, take the time to meet with a loan officer to know how much you can borrow. If you would like some good referrals, contact me at the phone or email address below or go to my Classified Ads link and look under "Lending Institutions".