Get Pre-Qualified Then Pre-Approved Then Find A Home

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Technically, the first step in getting a home purchase mortgage is to get pre qualified. Then get pre approved for the mortgage. Once you get pre approved you can go looking for a home and when you find the one you want to buy, that you can make the purchase offer with confidence that you can buy it. But, let’s look at each of these terms: pre-qualified and pre-approved.

What does Get Pre Qualified for a Mortgage mean?

One of the best things you can do for yourself if you are looking to buy a new home is to get pre-qualified. Getting pre-qualified tells you approximately how much home you can afford to buy based on your credit, income, and assets. You might find that you can buy more of a home than you really want to pay in a mortgage payment. The other might be true in that you find that you do not qualify for as high of a mortgage payment as you think you can make.

Pick a Loan Officer

To pre qualify, you will need to speak to at least one mortgage loan officer – our recommendation is that you speak to at least three. Since getting a mortgage is a very important financial decision you need to make sure that you are working with someone you feel you can trust. Review this article: What Questions to Ask When Shopping for a Loan Officer for a list of questions to assist you when you interview loan officers. This list of questions will to help you find out if they are qualified to help you and give you a sense of whether this is someone you want to help you get a mortgage.

What Do I Learn When I Pre Qualify?

Once you know what you can afford you will know the sales price range of the homes you can look at. This step takes about 10-15 minutes depending on how much you have to say about your situation. Once you are pre qualified you will know:

  • What your approximately monthly house payment will be
  • The price range of the home you can purchase
  • How much down payment, if any, that you will need or want to put down
  • What are your approximate closing costs
  • That you can confidently go out and search for homes and put in an offer if you want to
  • What kind of loan program that might be good for you based on your wants, needs, and desires
  • What should you expect to happen once your home purchase offer has been expected

When you find a mortgage loan officer to pre qualify you make sure you also discuss some of the following items if they apply to you:

  • My time frame for wanting to move
  • What are your future plans
  • Your short and long term financial goals – your mortgage can play a very big role in you reaching your goals
  • Do you already have a house in mind
  • How important is the interest rate versus saving money upfront

What Does Get Pre-Approved For A Mortgage Mean?

Once you have been pre-qualified, there is a tendency to go out immediately and look for a home. While this is not bad, it is a little premature. To be absolutely sure of knowing the sales price range that you can shop for, you ought to get pre-approved.

Getting pre-approved takes getting pre-qualified a little further. In this step you will actually give your loan officer your pay stubs, W-2′s, and asset statements like your bank statements or retirement account statements. If your loan officer has not pulled your credit they will during this step. You may even be asked to sign a full loan application and any additional paperwork necessary to get your file underwritten.

Submit Your Loan For An Underwriting Approval

During this step, your loan officer will verify all of the information that you gave them in the beginning. They will then submit your personal financial and credit information to underwriting to determine if you qualify for the mortgage or not. At this point, unless you have a property picked out, the loan officer will most likely make up an address and a sales price that matches either your payment comfort level or what they think that you’ll qualify for.

An underwriter will look at your loan and credit paperwork and give you a thumbs up, or a thumbs down about being approved. More often than not, no matter whether you get an approval or a denial you will get information or recommendations – we in the business call these either conditions or stipulations – for what is needed to get you a mortgage. Your loan officer should also tell you what you need to do to qualify.

Additional Tips About Your Pre-Approval

Make sure to discuss with your loan officer while getting pre-approved is features and benefits of loan programs that you qualify for. Review mortgage loan programs and FHA financing.

Once you are pre-approved your loan officer can give you a pre-approval letter. This letter accompanies your sales offer on the home you want to buy. It tells the seller that you are qualified to buy their home. The term: pre-approval letter is called many different things in each state. Any loan officer will know what you mean if you ask them for a pre-approval letter to give to your real estate agent.

Quite often real estate agents will not show houses to anyone who has not gotten pre-approved. It makes perfect sense – it is a huge waste of time to show homes to someone if they cannot qualify to buy them. Real Estate Agents, like loan officers, only get paid when you buy a home and they get their commission. They are not too interested in working for free only to find out that someone cannot buy a home anyway. So do everyone a favor - get pre-qualified then pre-approvedbefore you shop for a home.