Buying a home….Get a Pre Approval Letter

Pre qualified vs pre approved, which is better?

You’ve decided to buy a home…. there’s a lot to know first.

  • You’ve checked and rechecked your budget, and have decided on a price point you can pay
  • You’ve got 20% plus set aside for the down-payment and closing costs
  • You’ve compared interest rates and lenders and have decided on a reputable one
  • You’ve given the lender all necessary data and are waiting….They check your Credit Score and plug in all the data and on an income to debt ratio decide if you’re a risk or not.
  • They call you — Yes, you are Pre-Qualified.  More data, more checking, more, more, more.
  • Back and forth phone calls, and then they call to let you know how much they will allow you to borrow, and approximately how much your monthly payment will be using their ‘borrowed figure’. There will be an interest rate based on the figures.
  • Their figure may be more…or less than yours.  If it’s more, you don’t need to purchase a home that high.  Keep within your  budget comfort zone.  If their figure is lower, you’ll have to think less… smaller, different neighborhood etc.  Not such a bad thing, really.
  • You are now ‘Pre Approved’….meaning you are approved to get a loan for ‘X’ amount.  Once you are pre approved, ask the lender for a letter verifying that.  Have it with you when looking at homes, and should you decide to make an offer on one, show…but don’t give… the seller/realtor your Pre Approval letter.  It shows them you are a serious buyer, and have already done your due diligence in securing the mortgage loan for the amount shown in the letter.
  • Sometimes, if another buyer is interested in the same home, and offers a close figure to yours, the seller is apt to choose you, because you’ve gone that next step done – the pre approval.
  • Again, know it is better to get a smaller home, with a smaller mortgage – one you can comfortably handle within your budget, leaving some wiggle room in the budget for incidentals and ‘what-ifs’.  Where as if you buy too much home, finding too late you can’t handle the payments – you end up being house poor – or worse, losing it completely.
  • Remember:  Staying within your own set limits for mortgage payments, maybe by buying a smaller home, allows you to set aside money each month for not only everything else in your budget, but also those extras…… painting, redecorating, new roof etc.
  • Don’t end up “House Poor”.  Think ahead.