etting pre-approved for a an actual loan -- in other words,
mortgage loan can make the in great detail. This review will
entire home buying process give you a good idea how much of
go smoother. But don't confuse a mortgage loan you can afford.
pre-approval with
pre-qualification, as many home Here's a more formal definition
buyers do. of pre-approval: The process of
applying for a loan and obtaining
What is Pre-Qualification? approval for a maximum loan
amount before having a purchase
Pre-qualification is an informal agreement.
look at your income vs. debt to
see how much of a mortgage loan Benefits of Pre-Approval:
you might qualify for.
Pre-qualification does not take With a pre-approval letter in
your credit into account, so it hand, you can be more confident
does not guarantee loan approval. that the lender will approve your
It's just a quick review of your actual loan (after you make an
income and your debt -- the two offer on a home). Being
factors that make up your pre-approved also shows sellers
debt-to-income ratio. you're serious about, and capable
of, buying their house. This can
What is Pre-Approval? be a factor in hot markets where
the sellers receive multiple
Pre-approval means a mortgage offers.
lender has examined your credit
and income much more thoroughly. For example, if you bid on a home
When you get pre-approved, the along with three other
lender will look at your finances prospective buyers, but you're
as if they were approving you for the only one who has been
pre-approved by a lender, then make an actual loan commitment.
you stand the greatest chance of
having your offer accepted. Conclusion:
The sellers will be more Pre-qualification and
comfortable with you since a pre-approval are two different
lender has said, in essence, things. Think of
"Yes, this person is worthy of a pre-qualification as a quick
home loan." The buyers without review from the lender, and
pre-approval, on the other hand, pre-approval as a longer and more
would be "unknown quantities" to detailed evaluation. Pre-approval
the seller. will help you identify credit
problems early on. Pre-approval
Keep in mind, however, that while also shows buyers you're serious
a pre-approval is stronger than a about buying.
pre-qualification, it's still not
a guaranteed loan. After you make Therefore, it's a good idea to
an offer on a home, the mortgage get pre-approved before you start
lender will once again review the house-hunting process.
your finances and credit. They'll
also have the house appraised. * Copyright 2006, Brandon
Only when they've approved of Cornett.
both you and the house will they
About the Author:
Brandon Cornett is the editor of http://HomeBuyingInstitute.com, one of the Internet's largest and most respected libraries of home buying information -- more than 100 expert articles in 12 different home buying categories! Put this knowledge to use by visiting http://www.HomeBuyingInstitute.com.
Source: www.isnare.com
