“Before I take you out to see the house, I need a prequal letter!” That’s what one of my top realtor partners tells his prospective clients. He’s not trying to be rude, he doesn’t want to get their hopes up on a dream home that is beyond their financial means. That’s where the pre-qualification* letter comes in. It is basically a letter from a mortgage lender stating that based on a review of the client’s financials, he or she should be able to get a loan up to the amount shown in the letter.
“Should”, it is important to note, doesn’t necessarily mean “will” because the pre-qualification* is based on the initial information that prospective clients provide me as a lender. A more thorough review may reveal that the client needs time to work on lowering their debt to income ratio or saving additional money for closing costs. Still, the pre-qualification* process is a very important first step in the home buying process.
I truly believe in calling the pre-qual a first step! It’s as simple as calling a lender and giving them a basic overview of your finances. I’ve worked with countless clients who have already found their dream home only to have those hopes dashed when I tell them that they just can’t qualify for that home. Given time and work on their credit, or perhaps in saving additional funds, they’ll get there, but by then the home may already be sold. It is very frustrating and can even be painful emotionally as these clients have already invested so much time searching for that special home.
So, you get your pre-qual letter. Or is it a pre-approval**? People often ask me for one when they mean the other. What’s the difference?? Whereas the pre-qualification* is generally based on what you tell the lender, the pre-approval** process requires documentation that the lender verifies to validate what you were pre-qualified to buy. This includes financial statements, income and wage reports, and importantly a credit check.
Once the lender has reviewed your application, financials and credit report, they can provide you with a detailed estimate on your loan, including one of the most important components of your mortgage: the interest rate.
Depending on the lender, you could go straight to the pre-approval** if you are serious and have your documents ready. On the other hand, if you’re shopping for interest rates then you don’t necessarily want your credit pulled so often as this may lower your credit score which could affect your ability to finally get the loan. Once you are fairly sure that you will in fact buy a house in the next 90 days, then get the pre-approval**.
Both pre-qualification* and pre-approval** letters are good signs to sellers that you are a serious buyer, taking the necessary steps towards completing the buying/mortgage process and not getting ahead of yourself. That said, both letters are only as good as the lender who signs it. I PRIDE myself in my pre-approvals. My realtors know that if I sign my name to the pre-approval** letter, then the loan will get approved. I’m that confident and my track record speaks for itself.Call me at Fairway and we can discuss options for both and get you on your way to buying that perfect home!
Mariem Bennett of Fairway Independent Mortgage Corporation is the leading provider of Mortgage Home Loans in Georgia and Florida. For more information on the prequalification and preapproval process, please call or Text this number any time 912-227-2447!
*A pre-qualification is not an approval of credit and does not signify that underwriting requirements have been met.
**Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation which has not been reviewed by Underwriting. Final loan approval is subject to a full Underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, and income information, and a satisfactory appraisal.