I get asked the the question on the differences between getting pre-approved and getting pre-qualified. If you have a verbal conversation, no credit pulled, no income documents reviewed or verification of assets then you are pre-qualified. To get pre-approved, you will have your credit pulled, income documents reviewed, and asset documents reviewed.
In order for you to borrower the money to buy a home, the lender must do their due diligence and solve for what I call the 3 pillars: Credit, Income, and Assets. These are the 3 qualifiers for borrowing the money to buy a home.
First time home buyers will be asked to review many documents and disclosures. It is wise to have an understanding of some of the preliminary items. Perennial Funding provides insightful tips for borrowers who are considering the benefits of buying a home.
Pre-qualification is an initial step that a home buyer can request to determine an affordable shopping range. However, a mortgage pre-qualification is generated with borrower-stated details that are not subject to verification. With the minimal level of due diligence, most real estate agents and home sellers are unlikely to accept a purchase agreement from a borrower with just a mortgage pre-qualification.
The mortgage pre-qualification step is very helpful to a prospective borrower who is unsure about his purchasing power to buy a home. Essentially, one of our licensed loan officers would ask the borrower to verbally provide his annual earnings, approximate monthly debts and the amount of money that is being sourced toward a down payment for a home. Within a few moments, the prospective borrower would receive details about a mortgage pre-qualification.
To apply for a mortgage pre-approval, a borrower will need to complete a residential loan application. The borrower must provide a variety of documents, such as recent pay stubs, banking records, tax returns for the preceding two-year period and other items.
A thorough examination of the loan application, financial documentation and the borrower’s credit is performed during an underwriting review process. Also, verifications are performed against employment records and the borrower’s housing history.
When we issue a mortgage pre-approval, local real estate agents know that a borrower is prepared to receive funding for a home loan. The mortgage pre-approval reflects the maximum loan amount, the amount of money needed for a down payment on a home, the qualifying rate of interest, the expiration date and other items that may be needed prior to the closing of escrow.
With a mortgage pre-approval letter in hand, a borrower can confidently shop for a home to buy. An experienced real estate agent will be able to research areas that the borrower desires. If multiple buyers are interested in a specific property, a borrower who has a solid pre-approval letter might receive a contract acceptance.
Our lending specialists are ready to assist first time home buyers with any questions or concerns about obtaining a mortgage loan. Contact Perennial Funding today at (888) 826-4856 to discuss financing to buy a home.