Pre-approval: The homebuyer's secret weapon
Summer temperatures are on the rise and home-buying season is heating up! Properties sell in a flash during hotter months, and you need every edge you can find to distance yourself from the throng of suitors and land the perfect home.
Pre-approval is a game-changer—it shows sellers you mean business. You’ve done your research, you know your budget and you’re ready to plunk down some serious cash on a brand-new home. But what exactly is pre-approval and how can it give you a leg up?
Before merging onto pre-approval road, fuel up at pre-qualification station. To get pre-qualified, a lender evaluates your debt, income and assets to give you a loan estimate for how much you’re likely to be approved. This quick procedure can guide your search and help you explore your mortgage options, but it doesn’t include an analysis of your credit report or an in-depth look at your ability to purchase a home.
For this reason, pre-qualification doesn’t carry the same gravitas as pre-approval. Your pre-qualified amount can help you determine your price range, but it’s not a sure thing. It’s simply the amount for which you might expect to be approved.
Once you’ve dipped your toe in the water with pre-qualification, it’s time to make a splash with pre-approval. You’ll complete an official mortgage application and supply your lender with the necessary documentation to perform an extensive check on your financial background and current credit rating. At this stage, you will most likely not have found a home yet, but you can leave blank any references to “property” on your application.
The basic formula of pre-approval remains the same from lender to lender. A lender reviews your credit report and financial information to determine your approved loan amount. Once the process is complete, your lender can disclose your specific mortgage amount. This can help you pin down your interest rate, and in some cases, you might even be able to lock in a specific rate!
Keep in mind—you still need final approval to close on your home. This can happen once all the underwriter’s requests are approved and a Clear to Close (CTC) is issued.
Summer is peak home-buying season and the competition can be stiff. Play chess while other homebuyers are stuck playing checkers: pre-approval can put you on the fast-track to home ownership.
Happy house hunting!