What is Pre-Approval?
Pre-Approval is having a lender or mortgage broker review your finances and specify in writing the amount they are prepared to lend to you in order to purchase a property.
Should I get Pre-Approved?
Yes, when you are ready to purchase a property it’s a good idea to get pre-approved.
- you will know which homes you can afford and not waste time on ones above what you can afford
- your offer will be quicker and easier to submit when you find a home
- some real estate companies will require pre-approval to work with you
- you will need pre-approval to make an offer on a bank-owned property (REO)
- you will have more time to research and shop for the best mortgage value, see some research here.
What is the difference between Pre-Approval and Pre-Qualification?
- Pre-Approval is a thorough review of your finances by a lender or mortgage broker and their approval, via letter, of a loan amount they are willing to lend to you to purchase a property.
- A pre-qualification is based on a conversation about your finances with a lender or mortgage broker without verifying your finances. This conversation may be important at the beginning of the process to determine a range in what you are able to afford to borrow and what mortgage packages are available.
If you are ready to purchase a home, follow-through with the pre-approval process.
Why would I wait to get Pre-Approved?
If you are not ready to purchase a home you may want to wait to get pre-approved. Pre-approval letters are normally good for between 60-90 days.
If you are looking for a short sale these sales normally take a longer time, so you may want to time your pre-approval in consultation with your agent and lender.