Two often confused terms in the home buying process are a mortgage loan pre-qualification and a home loan pre-approval.  The Central Ohio real estate market is very competitive.  There is a shortage of inventory and a large pool of buyers eager to get into a home.  In almost all cases there are multiple offers on new listings within a couple days.  Due to the sellers having offers to pick from they will always pick an offer that is officially pre-approved.  My team and I take the necessary steps to ensure all of our clients are officially pre-approved prior to them submitting an offer.  

Pre-Qualification

A mortgage loan pre-qualification is simply an estimate of how much house you can afford and how much money a lender would be willing to loan you. The best time to get a pre-qualification is right at the beginning of your home buying process, before you even start looking at houses. This involves either sitting down with a lender or talking with one on the phone, and providing information on your income, debts, and a potential down payment amount. The lender would then provide you with a ballpark figure in writing of how much he thinks you could afford to pay for a monthly mortgage. There is no cost involved and there is no commitment on either side. This estimate is just helpful in helping you figure out if buying a home is a viable option, and if so, what your price range would probably be.

Pre-approval

Getting pre-approved means that you have a tentative Fannie Mae DU initial underwriting loan decision for mortgage funding. In this case, you provide a home loan lender with actual documentation of your income, assets, and debts. This process typically requires an application fee as well, since the bank will run a credit check and work to verify all your employment and financial information. Once you are approved, the lender will give you a letter of commitment, stating how much money her bank is willing to loan you for a home purchase. With a pre-approval in hand you can start your shopping - real estate agents and sellers will take you much more seriously when they see you have your mortgage funding in place.

It is important to understand, however, that even a pre-approval is not a guarantee that you will be approved for a mortgage loan.  The funding will only be given when the property appraisal, title search, and other verifications check out on the home you have chosen to buy.  

BUYER DO'S AND DONT'S

Do not open any new debts before or during the approval/contract period

*Do not have your credit pulled too many times

*Do not deposit cash into bank accounts (cash deposits cannot be considered in total liquid assets no way to verify paper trail)

*Dont switch jobs before or during the approval/contract period

*Keep paper trail of asset movement between accounts

*Send updated pay stubs and asset statements to lender during the approval/contract period

*Always ask questions its your loan officers job to understand and interpret your questions and concerns