What is a
A pre-approval is an early assurance from a mortgage lender. It states that you meet the necessary credit requirements for a home mortgage for a specific loan amount, subject to verification. And, if you get a pre-approval from one of our lenders, you'll be able to instantly print out a pre-approval letter that states your borrowing power and includes the lender's name and address.
It is a good idea to get a pre-approval, whether or not you've found a house. Since a pre-approval gives you a good idea of the amount of money you are eligible to borrow, it lets you focus your search on homes that are within your price range.
Once you find a house, a pre-approval letter strengthens the offer you make to the seller. It demonstrates your financial strength and shows the seller that you have the ability to buy the house. Although a pre-approval letter is not a final loan commitment, it can be shown to listing brokers when bidding on a home. Home sellers prefer to accept offers from pre-approved buyers.
4 Reasons to
Getting pre-approved for a home loan only requires a minimal amount of information from you -- much less than what is needed on a typical loan application -- and by using one of our lenders, you'll receive a response in minutes! Plus, most lenders who grant you a pre-approval letter will only require that you update your pre-approval information to confirm that your financial picture hasn't changed since the pre-approval letter was written.
So why put in the time up-front getting pre-approved? The following four reasons should make clear why being pre-approved is a smart decision:
Keep in mind that a pre-approval letter is not binding on the lender. Any change affecting your ability to pay -- including a job loss, an interest rate increase, new financial obligations you've assumed, or any other significant financial changes -- may affect your home loan pre-approval.
The goal of pre-approval and pre-qualification is the same -- to demonstrate to the seller that you are financially qualified to make a valid offer.
Pre-approval is a step better than pre-qualification. A pre-approval is an early assurance from a lender that lets you know that you already meet the necessary credit requirements for a specific loan amount (subject to verification). A pre-qualification only determines how much of a loan you might be able to afford based on the information you provided to the lender. That's why a pre-approval is more valuable and carries more weight than a pre-qualification.
A pre-approval requires the following information:
To get pre-qualified you only provide the lender with basic financial information, which is not verified by the lender. As a result, a pre-qualification letter is merely an opinion of the lender based on the information provided by you. That's why a pre-qualification letter isn't as powerful as a pre-approval letter.