One mistake that home buyers commonly make is not getting a pre-approval. Many home buyers believe that a pre-qualification is the same as a pre-approval, which is not true.
A mortgage pre-qualification can easily be defined as an estimation of how much a buyer can borrow. In many cases a pre-qualification is only as good as the piece of paper that it’s written on. It’s fairly common practice that a mortgage lender who pre-qualifies a buyer asks them for information such as income, debts, and other assets without verifying the information. If a buyer is not truthful or makes a mistake when giving the information this can lead to problems in the future when the mortgage is verified by an underwriter.
A mortgage pre-approval is what every home buyer should obtain prior to looking at homes. This can be easily defined as a written commitment for a buyer from a mortgage lender. To obtain a mortgage pre-approval a buyer will be required to provide the same documents that are required when formally applying for a mortgage, such as w-2’s, pay stubs, and bank statements.
There are many reasons why a mortgage pre-approval is better than a mortgage pre-qualification.
Two of the most important reasons why a pre-approval is better than a pre-qualification:
- Helps buyers beat out competition in multiple offer scenario or strong seller’s market
- Gives peace of mind to a seller when submitting offer that the mortgage will be approved
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