Having a prequalification and preapproval letter can make your home buying process easier. How can you buy your dream home? That’s what we talk about.
Do you know what satisfaction feels like? When you strive toward a goal and finally manage to achieve it. One of the occasions when you experience this euphoria is when you ascend to becoming a homeowner or elevate your living standards by moving to a new house.
But we are talking about reaching the mountain peak. In order to reach that point, you need to know about the challenges that you will face along the way. Especially for new home buyers, not knowing about what lies ahead can allude them from finding their preferred property.
So, before you go for a real estate hunt, one of the most vital things is to know, “How much loan amount can you borrow?” You will get the answer with a prequalification and preapproval letter in your hand.
Before you ask, we are way ahead of you. Here, we will talk about prequalification and preapproval, along with discussing how they can impact your home-buying process. Let’s begin.
This is generally when aspiring homeowners begin the home-buying process to check their creditworthiness. The pre-qualification process is where the lender assesses your financial standing to get an estimated loan amount you are eligible for.
The information that most lenders would be looking for is your
As an initial home buying process step, prequalification does not require document verification. Because of that, the prequalification requires less time to complete. You might have to wait for a few days.
It seems like a good offer, doesn’t it? Well, there are some downsides to prequalification that you would want to know. For starters, the estimated loan amount you get might not be accurate enough. That is because the prequalification process doesn’t involve document verification.
We talked about how credit history is one of the factors which lenders would want to know. Lenders accessing your credit report for lending purposes is a hard inquiry. This usually reduces your credit score.
But at this stage of the home-buying process, your credit report is not accessed by the lender. That means it is a soft inquiry. This will not decrease your credit score.
Some home buyers are not satisfied with mortgage prequalification for various reasons. Some top ones are
Those are the concerns that you might have. If so, you can proceed with getting preapproved for a mortgage. This is where instead of just asking for information, the lenders need proof of the claims you make. You can do that with valid and official documents.
These documents you might need to get pre-approved for a mortgage may include:
Since the lenders need to verify the documents, the preapproval process will be longer than prequalification. It may take 7 to 10 days to get the pre-approval letter. But it will be worth the wait, as you will get a more accurate loan amount estimate.
We mentioned one of the major reasons to go for mortgage preapproval is prequalification does not include a credit check by the lender. That means you might not know about the negative point in your credit report to work on and improve your creditworthiness.
Now, things will change. The lenders review your credit report themselves and check if your financial history contains missed payments, facing home foreclosures, or having your checks bounced. All these factors are accounted for when providing an eligible loan amount.
Are you thinking what we are thinking? That “If the lender accesses our credit report will be a hard inquiry. Won’t that decrease my credit score?” You are right.
The hard inquiry may decrease your credit report, but it will be for a temporary period. Your credit score should be back to what it was within a few months.
Now, you can dive into the home-buying process and reach out to real estate agents with a plan. After you have the prequalification and preapproval letters in your hands, you can ease your way toward moving into your desired home.
Generally, here is what your home-buying process looks like after being preapproved for a mortgage.
You need to work with people who know about the real estate industry trends and conditions. That is why a real estate agent is the glue that holds the entire home-buying process together
Your real estate agent can help you in various ways, from finding the property that meets your requirements to taking care of extensive formalities. They will be your representatives throughout the process.
As you have an estimate for the loan amount you can borrow, you can now find and visit properties that meet your requirements. Make sure that your real estate agent also knows about your preferences. So they can find help you find the right property.
If you plan on attending an open house event, it’s a good idea to take your real estate agent with you. Their insights can help you decide your next investment decision. Whether a property in the open house event meets your requirements.
When you find the house you are looking for, you can develop an offer. You can involve the real estate agent in this process to devise an optimum offer. Your pre-approval letter will also be submitted with the offer to ensure the seller knows you have gone through that process.
As you have the preapproval letter, the home seller will give you a high priority as compared to other potential homebuyers. That is because the seller knows you are financially secure and want to buy the property.
This gives you more chances to negotiate a favorable deal.
After you have negotiated a deal and the seller has accepted it, you will have to officially apply for a mortgage. This process should not take as long a time as it would have if you were not preapproved for a mortgage.
You already have your documents verified beforehand.
Note
Being pre-approved for a mortgage does not guarantee you will get the loan. Things can change between the time you are preapproved and officially opting for a mortgage.
Most lenders want a home appraisal conducted to know the actual property value. You can also benefit from it as you will know if the investment you are making real worth it or not.
When all the negotiations and settled and you have secured a mortgage, it’s time to complete the remaining formalities. This is where your real estate agent handles the documentation and paperwork to transfer property ownership.
The last but most important part of the entire home-buying process, have a good time in your new property. This is what you have worked for.
See how easy it is your home-buying process after you are prequalified and preapproved for a mortgage? All you need is to find a real estate agent that understands your requirements. Where to find one? HAR.com.
We have professional real estate agents listed on our platforms with proven experience in helping homeowners realize their dream.
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