Ruta Ramblings

Pennsylvania Real Estate Info for the masses

Pre Approval vs Pre Approved

If you are a buyer you are probably running into agents who are asking you to get  a pre approval before you start looking for that dream home. That’s great but don’t get that confused with a mortgage that has been pre approved.  In the former you are getting a cursory review from a mortgage broker based on a credit check and some voluntary info regarding your income and obligations. That takes about 15 minutes and you get a one page note from them indicating maximum loan amount and minimum cash requirements. Agents use that to submit to the listing agent to let them know that it appears that you qualify to buy the home.  What you can expect now is  the full-blown application process with all the fees and  verification to follow. Time consuming and you could still get turned down.

A better way to go might be to get pre approved for a mortgage. In this case even though you haven’t found a home you actually apply for a mortgage.  The entire full application then begins with detailed information supplied to the lender. You pay all the fees  and wait for all verification to be approved by the lender. If  formally approved you will get an actual mortgage committment from the lender conditioned upon an appraisal for the home of your choice. This approval is usually good for several months. You will know up front if you need to explain to the lender such things as: where is the down payment coming from, credit dings on your report, gaps in employment and whether you might need a co signer. Time consuming again but much more valuable than a pre approval. Now you can find the home, write-up an offer but be in a  terrific negotiating position with the owner since you already have your mortgage. At that point you will end up haggling pretty much only about the price and what tests you are going to require.

Another important point is that if you are jumping around from lender to lender  shopping rates  based on different agents recommending a particular lender, you have to be careful  on all of those credit inquiries. Several inquiries could affect your credit. A better strategy might be to speak to each lender first , compare costs and rates and then pick one to actually do the mortgage. One company, one credit check. Means a little more preparation but makes you much stronger in the long run.

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