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2011-11-30 19:39:20

The Difference Between Pre-Qualifying & Pre-Approving For A Home Loan

There is a difference between getting Pre-Qualified & Pre-Approved. A Pre-Approval is a document from the lender that confirms to the borrower a loan up to a certain amount based on a completed loan application, credit check, and possibly tax returns and employment verification. This Pre-Approval goes much further with a seller when submitted with an offer as opposed to a Pre-Qualification letter. A Pre-Qualification is a document from a lender that basically just states that they will give you a loan based on your meeting with the lender and what you told them about your financial situation. Neither letters are an absolute guarantee that the lender will extend to you the loan money 1,2 or 3 months down the road. A reason for this is that a persons financial situation can change dramatically as the days and weeks push closer toward a closing date for a loan. If Joe buyer decides to finance a new Lamborghini during escrow, Joe will most likely be sleeping in that car instead of a bedroom and the loan wouldn’t fund.

It’s imperative that a buyer in escrow understands that he/she may be subjected to last minute credit checks and funds verifications along the way heading towards closing. Not to fear however, if you remain conservative throughout your escrow period when buying a house and keep your job through that period of time, your Pre-Approval letter from your lender is most likely golden! So remember, Pre-Qualifying & Pre-Approving is not a binding contract requiring the lender to extend the loan, nor is it a requirement for you to take on the loan. It’s simply your first real step in preparing to submit offers.

You may ask, why can’t I just qualify at the last minute and save the trouble of meeting with a lender, after all I have great credit? Lenders will not close a mortgage loan for a property that is unidentified. This means, that you cannot receive your loan until you have found the home you want to purchase. The pre-qualification enables you to see your buying power, and your Pre-Approval enables you to jump on your dream deal the moment you know that’s the one!

Here are some reasons to get going with the Pre-Qualification and Pre-Approval process…

  • You will know what you can afford, it will save you time while narrowing your house hunting.
  • When you make an offer on a home it will be more appealing to the seller. He/she will know you are highly likely to qualify for the loan and be able to close on the home without delay.
  • Some sellers require a Pre-Approval letter before they will even consider your offer.
  • The qualification process will include your credit history, total debt, total income, and the size of your down payment.
  • You will know how much you are eligible to borrow and thus you will be able to determine the mortgage payments you will be making each month.
  • You will be able to budget your finances and stay organized. It will give you an outlook of what you can expect to save/spend in 15-30 years
  • Having a budget you will be able to focus on evaluating the houses and the neighborhoods including factors that are most important to you.

Hawaii has one of the best buyer’s markets that it has seen in a very long time. If you are looking for a home on Kauai, you are in luck, everything is on clearance! But don’t wait too long, or you might miss the opportunity. The Hawaiian Islands are desired worldwide as one of the best places to live. Due to the worldwide demand, your future home has high value protection, more than most other areas in the United States. Tighter lending standards has caused it to become more difficult to qualify for a loan, but a balanced combination of credit, job history, tax returns and debt analysis will land you the loan you’re looking for. It’s more important than ever to get qualified for a home mortgage loan because in most cases today BUYING IS CHEAPER THAN RENTING even in Hawaii. Dont’ wait, don’t hesitate, you’ll loose the interest rate!!!

Now that we have discussed the important reasons for getting qualified, choose three good lenders and go shop them all for rates and qualification letters. The beauty is that you can get qualified anywhere, and it does not require you to use that lender for your mortgage. This allows you to keep researching for that perfect rate. Rates are constantly changing, so find a rate that fits your loan. My advice is that you do all your qualifying within a 25 day period, this is very important and I’d be glad to tell you why!

If you’d like any help what so ever getting on track to purchase a home on Kauai, please give me a call any time.

Cory Beadle Realtor(s)

(808) 482-4276


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