Why Get Loan Pre-Approval?
Why get pre-qualified and a mortgage pre-approval? There are many advantages in being pre-qualified for a mortgage loan and having a loan pre-approval. If you were out shopping for a home and a seller had two potential buyers come along at the same time, the seller may be more inclined to take the slightly lower offer from a pre-approved buyer, more of a "sure-thing", thus avoiding the uncertainty of waiting to find out if the other potential buyer will be approved. Also banks, brokerage houses and mortgage companies will be more likely to accept a reasonable offer on a property that is real estate owned by them knowing the offer is from a pre-approved purchaser. Potential buyers with pre-approvals comfort sellers with the knowledge that the transaction can close quickly. Pre-approvals give you certain strengths in the marketplace. It will also save both parties to the contract valuable time as well as a lot of sleepless nights for the sellers wondering if they really have their home sold. It also gives a level of comfort to the buyer in not having to wonder if they will be approved. A pre-approved borrower has almost the same buying power as a cash borrower!
How do you obtain a pre-approval? You must complete the pre-qualification form and provide as much of the supporting information you can. Then your completed pre-qualification application is reviewed and your supporting documents are gathered for verification. The following information is recommended for a complete pre-approval; pay-stubs, W-2 forms, bank statements, etc. A credit report is also needed to determine your credit rating as well as verifying your debts. After compiling this information a loan agent and loan underwriter will review the information and determine the maximum mortgage amount. There is no cost for the pre-approval this is a service provided by Housing Assistance Corporation and its participating lenders.
What happened after a pre-approval?
When speaking with your Realtor, stress the fact that you have been pre-approved, and watch their eyes light up! The fact that you have already been through the qualifying process makes their job easier, it allows them to focus on homes in your price range. When it comes time to write an offer to a seller, your approval certificate can be used as a bargaining tool. Seller can practically consider your offer as a "cash contract". Keep in mind pre-approvals are only good for approximately three months; the documents you furnish do expire after such time.
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The only piece missing is the property appraisal, which would be ordered upon receipt of a fully executed purchase agreement. Is $25.00, which is for the credit report, a charge that is normal on all loan applications? You are also furnished with a copy of the report for your personal records.
And when satisfied issues the pre-approval stating a maximum mortgage amount.