Pre Qualified vs. Pre-Approved for Home Buyers
Pre-Qualified vs. Pre-Approval
With the changes in the fundamentals of the mortgage industry since the Wall Street crisis last fall, the process of buying a home today has changed. Before the modifications in the mortgage industry, due to the changes in the financial market, home buyers bid on a home, and submitted a loan application once an agreed price was accepted between the sellers and buyers. In today’s market, the process has reversed.
In the current market, sellers and real estate agents will request that the buyer has been pre-approved by a local lender for the specific home/condo they are submitting an offer for. This shows the credibility of the buyers that they are prepared and serious, and that the buyer is fully qualified to purchase the home and received a letter from a local lender. The letter is critical showing the buyer has met the lenders basic criteria of satisfactory credit, employment verified, and assets substantiated.
Pre-qualified, on the other hand, leaves doubt in the sellers and agents mind that the buyer has not been properly screened to qualify for the purchase. The bank could be an out of town lender not familiar with the local market and property types and styles, may have not reviewed a credit report, and in most cases may not have the company authority to issue a letter supporting the buyer’s ability to qualify for the mortgage. Sellers are interested in serious, qualified buyers, who have the written confirmation from a lender before they will seriously negotiate an offer.
Do your homework before starting the process. Have a letter or the ability to obtain a letter from your loan representative within a short time period, and make the buying process less stressful. Find out what you’re qualified for before your search rather than learning of the surprises later.
Information gatherer from About.com Home buying and selling