Pre-Qualification Recap: Pre-qualification is the first step to buying a home, but not required. During this process, you will get an idea of how much of a loan you might be able to qualify for. Usually, this step can be done quickly over the phone and allows you to at least start looking in your budget.
Info Required: Income, assets, debt, projected down payment.
Visit our Blog to learn more: Pre-Qualification: Know Exactly What You Can Afford Before Shopping for a New Home
Pre-Approval: Pre-approval is more complex and should be done with a few lenders. This will allow you to compare offers. Whereas a pre-qualification can get the ball rolling so that you can start looking for your home, a pre-approval actually determines how much of a loan a bank is going to give a buyer.
Once you find your lender (generally a lender can be referred by the agent you are working with), all information is gathered and your credit report (which hopefully turns out good) is checked.
Info required: Most recent bank statements (checking, savings and other), most recent W-2, proof of retirement accounts, mutual funds or stocks, your drivers license/SSC, and pay stubs from the last month. Your employer may be contacted for proof of employment.
If the bank is willing to give you a loan, you will get a GFE (aka. good faith estimate) which outlines the loan, it's interest rates and closing costs. Comparing quotes from multiple lenders will help you get a better interest rate or lower closing cost. Once you receive your GFE and find a home, the bank will appraise the house to check it's actual value. After that, you can look to qualify for a home!
Why Get Pre-Approved?
It's important to get pre-approved before you actually begin the buying process for a few reasons:
1. Be Competitive: Not many people get pre-approved, so, when it's time to put in an offer, you will be more likely to get the house you want if you already have your pre-approval letter.
2. Save Time and Heartache: You can dream big, but you don't want your dreams shattered. So, get pre-approved so you don't waste time or emotion over a home you don't even qualify for.
3. Be a Good Client: Real estate agents are more likely to work with you when you have your approval letter. By being pre-approved, your agent knows the deal won't fall through and they can do a better job looking for the home that you can afford. This way, it is easier to find the house that you can afford and will love without wasting your time.
I am a real estate professional, serving Boulder and Denver, Colorado. My extensive knowledge of the market, coupled with my commitment to provide extraordinary service, has resulted in hundreds of successful transactions. Let me help you buy or sell your home.