subject: Advantages Of Mortgage Pre-approval [print this page] With today's economy, getting a mortgage can be difficult. However, if you are in the market for a new home, it will help dramatically if you are preapproved before you begin the adventure of making an offer to a seller. While many people think preapproval and prequalification mean the same thing, they are quite different. As preapproval is the cream of the crop and will allow you much more negotiating power, not to mention, the potential of not losing the home once you find the home you are hoping to purchase. While shopping for a home, the different terms of languages do get a bit confusing, but with simply familiarizing yourself with a few simple terms, you will begin to understand the language and rules of the mortgage industry.
Becoming preapproved means that you are qualified for the amount of the loan. The lender has reviewed your income, assets and credit and has qualities you for "x" amount of dollars. It also says to the seller that you are serious about purchasing the home and positions you better to negotiate with the seller.
Prequalified does not mean the same as preapproved. When you become preapproved, it means that you have passed a higher level of lender scrutiny that that of the prequalified buyer. Prequalified is simply saying that they feel you are qualified and will pass, whereas preapproval means the lender has confirmed it.
As a buyer, a preapproval allows you to know how much you qualify for, allowing you to know the price range to shop for. When you find the home that you wish to purchase in your price range, prequalification assures that you will be able a mortgage for the home. You also won't have the waste of money on application fees and an appraisal, which you are liable for if you are turned down. The buyer is also able to compare loan packages from various lenders to ensure that he is getting the best suited for him. Preapproval puts the buyer in a very good position.
In order to be preapproved, you will need to submit the following to a potential lender:
- Tax returns for the last two years and W-2s
- Pay stubs which verify that you are currently employed
- Documentation of all other income, such as investments, second job and / or child support
- Current bank statements
- A letter authorizing the lender to obtain your credit report
Becoming preapproved does not lock you into an interest rate; it does however it does outline the general terms of the loan in which you qualify for.
If you are in the market and shopping for a home, preapproval is your best bet, as there is no obligation on your part, but it puts you in a better position of power. And, once you do decide on a home to purchase you can shop around for the best mortgages on the market. Also please remember, preapproval is typically honored for 50 to 90 days, however, lenders will still verify that employment status and other attributes have not changed.
