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 Are you just pre-qualified or fully pre-approved for a loan?
St Paul, MN: Smart home buyers in Minneapolis, St Paul, Madison, Milwaukee, and throughout all of Minnesota and Wisconsin should know that before you begin to shop for a new home, you should set up a time to meet with me so we can figure out how much you can afford. This will put you in a better position as a buyer. Thats also when it is important to understand the distinction between being simply pre-qualified for a loan, or being fully pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, I will collect information about your debt, income, and assets, usually over the phone. Well look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. It is important to understand that pre-qualification is just an estimate of what you are eligible to borrow, not a commitment to lend.
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To get pre-approved, you will complete and sign a full mortgage application and actually provide me with copies of various information verifying your employment, assets and financial status such as pay stubs, W-2 forms, and bank statements. Well review your mortgage options and submit your application to underwriting. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
Getting fully pre-approved for a loan gives you a competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
Only an actual Underwriter can pre-approve you, so be very cautious of any lender who says you are pre-approved, and you have never submitted any documents, or they have never put your application in front of their underwriter!
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly. BUT, it is about as close as you can get to knowing your financing is going to approved, and is a huge leap above a simple pre-qualification! Futhermore, most good Realtor's require you to have one before they start showing you homes.
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