Salvador Roberts

In our current blog series, we are walking through the 7 key steps involved in buying a home. We’ve already talked about the importance of getting your finances in order and hiring a Realtor®. Now, we will dig into the home loan application process. More specifically, we want to talk about the value of getting preapproved for your mortgage loan.

A Devastating Scenario
Imagine this common scenario. You find the home of your dreams. You make an offer. Your offer is accepted by the seller. You are over the moon with excitement. Then, you apply for your mortgage loan and are denied. Maybe you don’t qualify for a home loan at all, or more likely, you might not qualify for as much as need to buy that dream home.

This experience is devastating, and we’ve seen it happen time and time again with home buyers who aren’t prepared. Of course, this goes back to the first step in this series about getting your finances in order. If you have high amounts of debt, low or inconsistent income and/or a poor credit score, you might find it harder to qualify for a loan—or you may only qualify for a certain amount that won’t give you as much buying power.

This is why it is so beneficial to get pre-approved for your home loan. It’s an easy process and it will completely change the way you can approach your home search and make purchase offers.

7 Steps to Consider When Purchasing Your Home
Check this Guide Out! It is a must read if you are about to buy a house.

Mortgage Preapproval vs. Prequalification
First, let’s review the difference between a preapproval letter and a pre-qualification. Sometimes, these terms are used interchangeably when people talk about mortgages. However, they are very different. A mortgage qualification is a very simple process where the lender only looks at some basic information provided by the applicant. The lender can use this info to provide a general pre-qualification letter with a rough estimate of what you might be qualified to borrow. It is not fully verified. The amount is not set in stone.

Securing a preapproval letter requires a more comprehensive process. For this, a lender will verify your income and assets, perform a credit check and complete some preliminary underwriting steps to give you a more accurate assessment of your mortgage loan eligibility. The preapproval letter will more specifically outline the preapproved loan amount, specific loan program, interest rate, and down payment for which you are approved.