Preapproval? Prequalification? What does it all mean? When it comes to buying a home, it's necessary to have all your ducks in a row - especially the financials. Below, we've laid out some essential information to help your preapproval process go smoothly.
What does it mean to be prequalified or preapproved to buy a home?
Think of the pre-buying financial process as getting a driver's license. When you start driving, you get a learner's permit. This is like prequalification. For a prequalification, a mortgage broker reviews a buyer's hypothetical income, credit scores and other relevant factors. Then, the broker provides hypothetical interest rates and terms. This gives buyers an idea of what to expect and whether now is a good time for them to buy.
The next step is preapproval
. Preapproval is like moving on from a learner's permit to a full driver's license. Preapproval is when a lender provides a conditional, real mortgage offer a buyer can take to realtors and sellers. Here's why it's a good idea to get preapproved before you go house hunting.
1. Preapproval makes your shopping experience easier.
If you're preapproved for a certain dollar amount, you'll know your price range going into the hunt. Your realtor can find appropriate options within your budget, which can save time.
2. It gives your offer some credibility.
Remember, sellers aren't just looking for the highest offer. They also need a reliable
offer. When you make an offer with a preapproval letter in hand, the seller know you're "good" for the money. It also gives you the confidence to make an offer when you finally find the house you're looking for.
3. The heavy lifting is done upfront.
The mortgage and financial process of buying a home can take a lot of time. Preapproval can make things easier and faster. This also gives you time to sort out other things that arise in the contract process.
How do I get preapproved?
To get preapproved, you'll need to show your:
- Credit score
- Credit history
- Debt-to-income ratio
- All relevant personal, income and financial account information
A lender can pull many of these items. Before requesting approval (when the lender actually runs your credit score), ask around for the rate ranges various lenders can offer. This is part of your prequalification process. Once you've found a range you're comfortable with, request the approval from a single lender.
How can we help?
At Flavin, we want to make buying your dream home an easy process. Our real estate agents are savvy on all preapproval processes and well-versed on what various local lenders offer. Let us help you! If you or someone you know needs real estate services, click here to contact Flavin Realty's team of highly qualified agents.