One of the first things I ask when starting to work with new buyers is “are you preapproved for a loan”? Let’s look at why it’s so important to answer YES.
What is the difference between a prequalified loan and a preapproved loan?
Being “prequalified” means you have talked to a lender or used an online calculator on a lender’s Web site; given your income and listed your debts; and asked for the lender’s opinion on what you can afford. The lender then gives you price range in which you should look. This simple formula means you are prequalified but the lender has not verified or approved any loan.
Being “preapproved” means you will meet with a lender and complete the following:
- Fill out a mortgage application
- Pay for a credit check
- Submit pay stubs with year-to-date earnings or other documentation of income
- Verify sources for your down payment and closing costs
- Receive a letter from the lender verifying that you are approved to offer an amount at or less than than the qualifying amount
The preapproval letter is a crucial part of a contract offer. It says you are a serious buyer, that there is money ready for the closing table and that the deal can close quickly.
Are YOU preapproved? Or are you just starting the process? Give me a call at 320.232.7053 and we’ll work through this together.