Finance Friday #5 - Home Buying 101: Pre-Qualification vs Pre-Approval

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Ever wonder why it's so important to get your financing options underway before you start to look at homes? Today we cover the significance of becoming pre-approved, and why it's a much better option than pre-qualification. #homebuying #eastcobb #eastcobbga #arielstarkerealtor #realestatetips #myfirsthouse #atlantahomes #eastcobbhome #mariettaga #visitmariettaga #personalfinance

A post shared by Ariel Starke, REALTOR® (@arielstarke) on Feb 21, 2020 at 2:16pm PST

If you’re one of millions of Americans not able to buy a home fully in cash, your first step before you ever set foot in a listing should be to get pre-approved for financing.
Let’s talk about the different stages of loan approval:

1. Pre-Qualification - In this stage, you (and a partner who will be purchasing with you if applicable) send your basic info like income and savings over to a lender. The lender can then give you a ballpark estimate of how much you might be approved for should you decide to make a purchase. The lender does not go over everything in depth; basically this step is to give you an idea so you can help narrow down an area or size of home you might like to purchase. The amount you’re pre-qualified for is based only on the information you’ve provided, without serious investigation by the lender.

2. Pre-Approval - With very few exceptions, this is the stage I will ask all my buyers to arrive at before we see homes together. To become pre-approved with a lender, they’ll require proof that you are who you say you are financially. You’ll need to provide bank statements, pay stubs, tax information, and proof of assets/ funds. There will then be an extensive check into your financial history and credit rating. At this point, the lender can conditionally approve you for a loan at or below a certain dollar amount.

3. Fully Approved - At this stage, the lender has underwritten your loan and you are ready to use it on your new home! In some cases, we can even get this done BEFORE you make an offer!

Why does it matter whether you’re approved?

1. Gives you a competitive advantage over other buyers - Who would you take more seriously in an offer situation: someone who has actually been vetted by a lender, or someone who has only begun the process? Many owners will not even consider an offer from a buyer who has not been pre-approved.

2. You’ll be alerted to potential problems in advance - There’s nothing worse than having your offer accepted, then SURPRISE! You can’t actually get approved for the amount you offered, and the purchase falls through. Goodbye dream home! I have seen this happen so many times, and it’s completely avoidable.

Ready to get pre-approved?