Being prequalified and preapproved for a mortgage can make it easier for you to buy a home. Want to know how? That is what we will talk about.
If you are going to buy a house, it is not easy to wake up one morning and say, “Yes. I want to buy a house.”
But the thing is, thinking about buying a house does not mean you will be able to do it. It’s only the first step. After that, the real home buying process begins. One of the first things to do before going on a house hunt is to know the mortgage amount you are eligible for.
Why? Because you don’t want to be in a situation where you select a real estate but don’t have enough mortgage loans from the lender.
Prequalification and preapproval are the friends you need to avoid the heartbreak of not buying your preferred home.
Have questions about the difference between prequalification and preapproval? This is the place for you. We will discuss all about prequalification and preapproval, along with the advantages borrowers can expect from it.
Do you remember the Oscar-winning Titanic movie? There was a scene where Jack Dowson was practicing holding the girl’s hand before Rose actually arrived for the feast.
The pre-qualification process is you practicing with the lender to know the process of obtaining a mortgage before you actually need to do it.
The lenders might want to know financial indicators like your income, debt, employment history, credit score, and more.
Before Jack Dowson’s practicing scene in Titanic, the person who opened the door did not check for any verification before letting him in. That is exactly what happens in prequalification. The lender assumes you are honestly giving the answers without any verification.
If you are someone who doesn’t want to wait long, like Rose’s fiancé Hockley tried to get a lifeboat, prequalification might be the right option for you. But since the result of prequalification is based on unverified information, the eligible loan amount might not be too accurate.
But it is still worth going for prequalification, as it can also help you understand the loan-obtaining process. And having an idea about the loan amount is better than not knowing the loan amount at all.
The lenders do access your credit report but for non-loan lending purposes, which is soft inquiries. That’s why your credit score remains the same.
The next time Jack Dowson (from Titanic) tried to enter the same hall, the man at the door did not let him in the same hall. The lender might act as the man on the door when you want the preapproval letter in your hands.
Now, the lenders may want to see proofs that back the claims you have made. One of the proofs of your claims is by showing legal documents.
Some of these documents include:
It may take more time for the lender to inspect the documents than it for the rescue to arrive at the Titanic crash sight. But the good news is you will get a much more accurate loan amount estimate than you did after prequalification.
One potential downside you need to prepare yourself for is “Your credit score might go down.” Reason? Because this time, the lender will access your credit report with a hard inquiry to look for a history of foreclosure, fraud, and similar suspicious financial activities.
But that is nothing to worry about. Your original credit score will be revived within a couple of months.
Before the preapproval, ensure you are credit report is good to go. Multiple hard inquiries in a short span can give a negative perception to lenders. They may assume you are consistently trying to obtain a loan and failing at it.
To clear up any confusion you may have about prequalification and preapproval, both of them serve the same purpose. That is to give you a preview of what to expect when going for the loan-obtaining process.
Here are some ways in gives prequalification and preapproval can help you get into your preferred home.
When you know the estimated loan amount you will get from the lender, you can find a property that’s within your budget. You will not have to waste the effort to search for a high-priced property that you can’t afford.
Once you are preapproved for a mortgage, you will build higher credibility with the lenders. They will know you have gone through the verification process and are eligible for a mortgage.
This can reduce the risk for the lender and can offer loans at a lower interest rate.
If you are a first-time or new home buyer, it can take time to get a grip on the home-buying process. Being prequalified and preapproved is the perfect rehearsal you need to find your feet and smoothly carry out the obtaining process.
Remember those documents you submitted to the lender during the preapproval process? You might not have to submit those documents again when you are obtaining the loan. This can save a lot of your time in having your documents verified again.
Even if you decide to go for a different lender and need to resubmit the documents, you don’t have to go and search for them. Since you have already submitted these documents during preapproval, you would know where to find them.
If you realize after preapproval that you need to work on improving your credit report and financial position, you will have time to do. It is way better than having your lender tell you to do so during the actual loan-obtaining process.
The RMS Titanic might have crashed and sunk, but your journey of buying a home is about to start with prequalification and preapproval.
Once you are prequalified and preapproved for a mortgage, it is time to go shopping for real estate properties. You can do that at HAR.com. We are a Texas-based organization that ensures your real estate investments go from being good to exceptional.
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