Would-be borrowers and home shoppers looking for the perfect dream home many times jump into the process of their home search without first speaking with their friendly mortgage lender about rules, regulations, and expectations.

Being prepared is the best approach when starting your home search. Without preparation, you are at risk of thinking a pre-qualification and a pre-approval are the same thing. Not so: pre-qualified and pre-approved have two different meanings.

Pre-Qualification

Pre-qualified is the first step borrowers take when considering a mortgage loan application. When you are ready to search for your dream home, make your first stop your mortgage lender’s office for a review of your overall financial health. There you’ll review your current debt, income, and assets.

After a careful evaluation, your mortgage lender or loan officer will provide you with an idea of your mortgage qualification limit.

One key point: lenders do not review your credit report or provide an in-depth look at your ability to purchase a home—ability to repay a loan—and risk of default.

You will discuss your goals or needs regarding the type of mortgage option you seek or need. Here’s where your lender will explain the various mortgage options available and recommend loans that are best suited to your unique situation.

If you are unable to stop by your mortgage lender’s office for a discussion in person, many lenders can pre-qualify you over the phone. Some lenders offer this service via the Internet, too. Usually, mortgage lenders do not charge for the pre-qualification process.

Pre-qualification does not mean your pre-qualified loan amount is set in stone. It is simply a guide to how much house you may be able to afford. A pre-qualified borrower does not carry as much influence as a pre-approved borrower.

Pre-Approved

Being approved for a mortgage loan means, you follow a more involved process. To obtain a pre-approval status, you formally apply for a mortgage loan, where you provide all the necessary financial documentation required for a deep-dive financial background check. Your mortgage lender will do an extensive review of your income, assets, debts, and credit check.

Here is where the lender determines the specific loan amount for which you are approved. You will learn more about the interest rate that you will be charged for your mortgage loan. Moreover, you should be able to lock in a specific interest rate.

A pre-approval is a conditional commitment in writing for an exact loan amount. You can then feel more comfortable with your house search, knowing exactly how much loan you can expect to borrow.

With a pre-approved status, you have bargaining power to make a deal on the home of your dreams. Your primary advantage: the seller knows a pre-approved buyer is one step closer to obtaining actual financing. Once you settle on a purchase price, you return to your mortgage lender, fill in the missing property details, and your pre-approval status will become a complete loan application package ready for underwriting review and, hopefully, approval and processing.

Okay, so now that you know every single subtle nuance in the mortgage lending process.....

"If you've been thinking about buying or refinancing a home, you've already taken the first step. The easiest way to get started is to actually start. I'm happy to talk to you and break the approval process into easily digestible parts and help you understand the process. There's no contract or obligation to utilize my services and I am sincerely happy to offer my advice and the chance to earn your business." - Ryan

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Ryan Vucic
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