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Pre-Approval VS. Pre-Qualified

Posted on March 13, 2014 by Ray Williams (NMLS #216267).

Pre-approval vs. pre-qualified, is there really a difference? With inventory low, this can cause stress in trying to find a home. With that being said, for some reason, some people out there looking are forgetting the most important factor in putting in an offer on a property.  They are NOT getting pre-approved prior to going under contract!

I honestly can’t stress enough the importance of getting pre-approved, NOT pre-qualified, pre-approved!  There is a huge difference between the two approaches.  Getting pre-qualified does NOT include physically looking at your financial documents (paystubs, W2’s, tax returns, bank statements, etc.).  I get it that you may not want to send these financial documents into a lender prior to going under contract because you are just wanting to get the house and figure you can deal with all of the details later.  I am just going to warn you now, you are making the assumption that you will qualify or that there are no real concerns in qualifying.  Rather than letting the lender review your financials thoroughly and understand your individual situation (i.e. recent entry to job force, move to Colorado, job changes, debt paid off and so on).

Getting a mortgage is the most important step in preparing to buy a home.  You can’t buy a house without the financing, correct?  Unless your paying cash.  Just because you disclosed your financials over the phone (income, work history, etc.) and maybe even had your credit ran, this is getting pre-qualified, which does not give you the security that you are approved for a mortgage.  An experienced lender will review your financial documentation through the eyes of an underwriter and project what else will be needed by underwriting, ask for it, and review that as well.  They will be thorough, and that may seem slow to you if you are hastily trying to write an offer and didn’t properly prepare in advance.  Your goal is to write an offer and close on a house, or simply to write an offer and flip your life upside down?

I say this because already 3 times this month I’ve been contacted and asked to “save” a deal.  The reason is because a previous lender didn’t do their due diligence and pre-approve a client before giving them a lender letter.  Of course, I am more than happy to help and in most cases I’m able to “save” the deal.  In reality, most of the stress the clients get put under trying to transfer all the needed documents and usually under a very tight time crunch, all could have been avoided.

My suggestion is that if you are looking to purchase a home, make sure you get pre-approvedNOT pre-qualified!  Take the extra time upfront to gather the needed documents, find a lender and get pre-approved prior to looking at properties and putting in an offer and going under contract.

If you have any questions please make sure to contact us.  We are always here to help.

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