Why Should I Get Pre-Qualified or Pre-Approved?

Before searching for a new home, it's a good idea to get pre-qualified or pre-approved for a home loan.

What is the difference between pre-qualification and pre-approval?

Pre-qualification is about a 15 minute phone call, or it could be an online application, with your bank or lender in which they ask you some questions about your financial history and determine what amount of money you are qualified to get for a home loan. This is generally the first step in the home loan process.

Pre-approval is similar to pre-qualification. The bank or lender sends you a check list that you fill out, then they run it through their system to verify your financial history and credit report. They then determine what amount of money you are approved to get for a home loan. 

Pre-approval is definitely a stronger bargaining chip, but either usually suffices.

Why should getting pre-qualified or pre-approved be your first step in the home buying process?

1. Let's say you and your family are house searching with your real estate professional and you find a house that meets all of your needs and you fall in love with it. You ask your real estate professional to put in an offer, the seller agrees to the offer, and everyone is excited.... then you go to your lender and the lender tells you that they cannot lend you that amount of money. Talk about disappointing! Now you have to go back to the drawing board and start the home searching process all over again which is just mentally and emotionally draining for everyone involved.

2. Our current market is very competitive. This means mulitple people are often putting in offers for the same house. However, let's say that you and another buyer put in an offer for the same amount, but you are pre-qualified for a loan, and the other buyer is not. When the seller chooses which offer to accept, they will more than likely choose your offer because you can prove with your pre-qualification letter that you can afford the house. 

Those are the two main reasons that you should get pre-qualified or pre-approved for a home loan.

If you need help finding a lender, or want recommendations on a lender, feel free to reach out to anyone on our team. You can find our contact information here.

Already pre-approved? Check out these next steps in the home buying process!