Should you talk to a mortgage professional before house hunting?
Absolutely! Even if you haven’t so much as picked out houses to visit yet, it’s important to see your mortgage professional first. Why? Before you begin to shop for a new home, you should set up a time to meet with me so we can figure out how much you can afford. This will put you in a better position as a buyer. That’s when it is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
We will initially pre-qualify you for your loan. When we pre-qualify you, we help you determine how much of a monthly mortgage payment you can afford, and how much we can loan you. We do this by considering your income, assets, debt, credit profile, and employment. Then we assess goals for a down payment and get an idea of different loan programs that would work for you. I will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow. The loan pre-qualification is short and to the point, and we keep the paperwork to a minimum!
The next step is getting pre-approved for your loan!
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you a competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
To get pre-approved, you will complete a mortgage application with us. We’ll review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you.
When you find a house that catches your eye, and you decide to make an offer, being pre-approved for a mortgage will do a couple of things. First, it lets the seller know that you have had a lender look at your specific financial situation and that you are pre-approved for a mortgage. It also presents you as a strong buyer and shows that you can close the transaction. The sellers won’t have to wonder if they’re wasting their time because you’ll never qualify for a mortgage to finance the amount you’re offering for the home. You have the clout of a buyer ready to make the deal right now! Your real estate agent will help you decide on an appropriate offer, but being pre-approved gives you the confidence to know you can follow through.
A pre-approval letter is not binding on the lender. It is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
You can always use the calculators available on our site to get an idea of how much mortgage you can afford — but it’s important to meet with us. For one thing, you’ll need a pre-qualification letter and eventually a formal loan pre-approval! For another thing, we may be able to find a different mortgage program that fits your needs better.
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