It
used to be that buyers could go house shopping and when they have found
their dream home, then they go to get pre-approved. However, in today's
market, that has proven to be one of the least effective methods in
landing the dream home.
Most lenders can pre-qualify you for a
mortgage over the phone. Based on general questions about your income,
debt, assets, and credit history, lenders can estimate how much
mortgage you qualify for. However, being pre-qualified and pre-approved
are different things. Pre-approval means that you have applied for a
mortgage; you have filled out the mortgage application, received your
credit report, and verified your employment, assets, etc. When you are
pre-approved, you know exactly what the maximum loan amount will be.
A
pre-qualified letter is not verified and in essence, does not count for
much if you are competing with other buyers who are pre-approved. When
you are pre-approved, you and the seller know exactly how much house
you can afford. It gives you credibility as an interested buyer and
lets the seller know immediately that you will qualify for a loan to
buy their property.
In addition to being pre-approved, it's
important to be pre-approved with a legitimate lender. Legitimate
lenders include: banks, mortgage bankers, credit unions, savings and
loan associations, mortgage brokers, and online lenders.
Some
lenders to avoid: those who lose a form or misplace a file, those who
gather information from you in an unorganized manner, those who are not
informed about interest rates, points or costs, and those who cannot
provide you with the right information.