![]() It’s a very lightweight “at a glance” look at a borrower’s credit and capacity to repay a mortgage. It is not the same as pre-approval, and it’s important to know the difference.Ī pre-qualification is a less meaningful measure of a person’s actual ability to get a loan. Mortgage Pre-QualificationĪs you do your online research, you may read the term mortgage pre-qualification. Sellers tend to focus on the path of least resistance: the buyer who is pre-approved. Being ready to go can also help in a hot market where it's not uncommon for sellers to entertain multiple, simultaneous offers. If you intend to negotiate the deal (and why wouldn’t you?), a pre-approval gives your offer a little extra gravity. Being prepared is particularly useful when making an offer on a house. Mortgage pre-approvals also signal to the seller that you’re a serious buyer. This pre-approval will save you a lot of time since you will be able to focus exclusively on houses in your price range. Your lender will be able to pinpoint a loan amount for which you qualify. Within the credit report, a lender can see your payment history (to see if payment obligations have been on-time and in-full) and your lines of credit (past and present). They involve pulling a three-bureau credit report (called a tri-merge) that shows your credit score and credit history as reported by third-party, respected institutions. It shows that you’re ready and able to buy. Today, the best way to approach a real estate agent is with a lender pre-approval in hand. Suffice it to say, conditions on the ground have changed since then. Unfortunately, soft lending standards helped fuel an eventual rash of foreclosures. In the old days, financial institutions were doling out money to anyone with a heartbeat. For purchase transactions, real estate agents will first want to know if you can get a loan. Mortgage Pre-Approval Mortgage Pre-ApprovalĪ loan pre-approval sets you up for a smooth home buying experience.Ī few things have changed since the real estate meltdown a few years ago. Here's what you need to know about each step. There are six distinct phases of the mortgage loan process: pre-approval, house shopping mortgage application loan processing underwriting and closing.
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