What you should know about preapproval and prequalification.
Before you can buy a house, you have to know how you’ll pay for it. For most people, this means taking out a home loan in order to purchase the property. Generally, there are two options to find out what a bank is willing to lend you, as long as everything checks out once you’ve picked a house: prequalification and preapproval. But, which is better for when you’re house hunting?
When you get prequalified, you are given a letter from a lender. Having a prequalification letter from a lender means that you are conditionally approved to purchase a home up to a certain price, based on the information about your income, debt, and down payment.
Prequalification doesn’t require the documentation and proof of funds needed for a preapproval, so there is some flexibility required when thinking about your budget. However, this step is helpful for homebuyers who have no idea about their budget for a home, helping them to narrow down the house hunt.
During the preapproval process, more financial details are taken into account and documentation is needed. You will provide in-depth details about your employment, financial picture, credit history, and more. A preapproval means the lender is stating confidence in lending you a certain amount of money to purchase a home, pending any issues with the house or unforeseen circumstances with your finances.
Many homebuyers get these two process mixed up, but having the right letter in hand can mean the difference between a seller accepting your offer quickly or waiting until you have the right preapproval notice. In short, a preapproval letter can be far more powerful when it comes time to place an offer on a home. This is because this letter states the lender’s confidence in you as a borrower. While prequalification makes it easier to shop for a home within your budget, preapproval gives you the strength to negotiate a purchase price.
The real estate industry can be a minefield, so it pays to have someone trustworthy by your side. Serving all of California and Texas, contact Andraya Coulter to get access to the top home loans. I can help you secure the loan that will land you the house of your dreams!