If you’re thinking about buying a new home, you may be confused by all the mortgage lingo you hear. Before you go house hunting, you’ll first need to know how much home you can finance. When you start the home loan process, you’ll come across terms like pre-qualified and pre-approved, often used interchangeably, but are they the same thing? What does it mean to get pre-qualified? How does that differ from pre-approval? Which one is right for you? And which one positions you best to stand out from the competition and secure the home of your dreams?
Read on to learn more about pre-qualification, pre-approval, and a surprising third option that catapults your offer to the top.
Lenders and agents often use these terms to describe a buyer’s status in the loan and verification process. Here’s how they stack up.
In addition to asking a few basic questions about your finances, a lender uses information that you self-report about your income and debt to give you a basic budget and preliminary green light to move forward. The lender is comfortable that you will qualify for a loan, but it’s a verbal transaction and there’s no guarantee because they have not done a thorough review of your financial records. You’ll receive an approximate loan amount that you can share with agents as you go through the home search process. It’s a rough estimate and a good place to start, but when you’re ready to make an offer on a home, you’ll need to work quickly to gain full approval.
While pre-qualification is a good thing, pre-approval is far better and absolutely necessary in today’s market. To gain pre-approval, you’ll formally submit a mortgage application and provide necessary documents, such as pay stubs, tax returns, W2s, and bank statements. In addition to running your credit, your finances, income, and assets are also fully vetted. If everything looks good, the lender conditionally commits to loan you the money and issues an approval letter that you can share with your sellers and their agent. Being pre-approved shows sellers that you’re a serious buyer and positions you to move quicker to closing than someone who is only pre-qualified.
Best: The Keller Mortgage Offer Ready Program
Here at Keller Mortgage, we reinforce your pre-approval with a third option: our Offer Ready program. You stand out from the competition with a fully underwritten pre-approval commitment, even if you don’t have a specific property in mind yet. That means you can shop around for your perfect home with confidence because you are backed by a guarantee from a top leader in the industry.
This is the strongest pre-approval you can get, which makes you a top contender in the marketplace. Once pre-approved and Offer Ready, you’ll be equipped to shop with an approval certificate that includes:
Other benefits of the comprehensive Offer Ready program include these great perks:
Ready to let your buyer know that you’re Offer Ready? Contact our friendly team at Keller Mortgage today or click here to schedule a call.
This is the strongest pre-approval you can get, which makes you a top contender in the marketplace
First-time homebuyer fears can range from “I can’t afford to buy a home” to “I can’t buy a home because my credit score is too bad.” While it can be natural to have these thoughts, it’s important to face fears with facts. Let's take affordability, for instance.
In part two, we will explore three more components of the first-time homebuying experience so you can embark on it with ease and confidence. Each magnificent tip below is brought to you courtesy of Your First Home (Second Edition), authored by Gary Keller and Jay Papasan.