Is this scenario familiar? You and your fiance have been looking for your first house for a few months without any luck. You’ve looked at numerous houses, but none seem to be “just right.” You’re patience is running out, and you are beginning to feel as though you never will find the right house.
Then one day, out of the blue, when out with your realtor, you discover one of the most charming little houses you have ever seen. A modern well-equipped kitchen, a large grassy backyard, a beautiful wraparound porch, and at price you believe you can afford. Everything you’ve been searching for, and then some.
Your real estate agent immediately contacts the sellers and makes an offer they can’t refuse. All that’s left is for you to obtain financing from your bank.
Your emotions are at an all time high! You contact your landlord and give notice that you will be moving out. You start shopping for your new home by picking out just the right curtains for your beautiful new living room. and then it happens. Your banks loan officer calls with the devastating news that your loan application has been rejected.
Your current income level is not enough to cover the combined, anticipated expenses of the mortgage, homeowner’s insurance, and property taxes.
Your first home is out of your financial reach. To make matters even worse is the fact that you have already spent hundreds of dollars on the home inspection, as well as non-refundable loan application fees.
Could this have been prevented? Yes! You could have saved yourself a lot of stress, and heartache had you first been pre-approved for a mortgage. With pre-approval you would have know exactly just how much house you could afford.
Pre-qualified vs Pre-approved
Getting pre-qualified for a mortgage is quick and easy. Just by speaking over the phone to a loan officer and answering some very general questions regarding your income, expenses, and employment is enough to get you pre-qualified.
This general information is used by the loan officer to provide you
with an approximate estimate of how much you could afford to borrow at current interest rates. The loan officer may even offer to provide you with a letter stating the amount on it.
However, since the loan officer has not actually verified the information given to him, there is no obligation to actually loan you that amount of money. It’s quite common, and possible that when the loan officer checks your credit report, and verifies the employment and financial information you provided that a determination may be made to loan you a lesser amount.
It is for this reason, that I consider pre-qualification for a mortgage to be a complete waste of time. It is much better, and more beneficial to you, to get pre-approved for a mortgage. The lender will now pull your credit report, and ask you to provide additional paperwork such as tax returns, and pay stubs to verify your salary as well as your place of employment.
The lender can now provide an accurate calculation of exactly how much you can afford to borrow. You will now know exactly what is affordable and what is out of your price range.
Mortgage pre-approval also comes with an added bonus. With your financing in place, you become more desirable to a seller. Quite often a seller will receive multiple offers. A seller will be more inclined to go with the buyer who has already been pre-approved for mortgage financing. With your creditworthiness not an issue you are a lesser risk than someone who is just pre-qualified.
Copyright 2007 Carl DiNello
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Carl DiNello is an Article Author whose articles are featured on websites covering the Internet’s most popular topics. To read more on this topic, please visit Finance Information! You may republish this article on your website, or e-zine so long as none of the content, or author information has been edited or changed in any way, and all links are left active and unchanged. |