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Getting a Legitimate Lender and Getting Pre-Approved It used to be that buyers could go house shopping and when they found their dream home, they would then go to get pre-approved. However, in today's market, this strategy has resulted in many a disappointed offeror who lost out to one whose pre-approval letter accompanied their offer.
Pre-Qualified vs. Pre-Approved
Most lenders can pre-qualify you for a mortgage over the phone. Based on general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you qualify for. However, being pre-qualified and pre-approved are different things. Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. When you are pre-approved, you know exactly what the maximum loan amount will be.
A pre-qualified letter is not verified and in essence, does not count for much if you are competing with other buyers who are pre-approved. When you are pre-approved, you and the seller know exactly how much house you can afford. It gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property.
Not All Pre-Approvals Are Alike
In addition to being pre-approved, it's important to be pre-approved with a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, mortgage brokers, and online lenders. Beware of giving your social security number and other private financial information to anyone you are not CERTAIN is legitimate and reputable!
Do I Really Need the Pre-Approval Letter?
Good agents back up offers with solid, verifiable documentation. When I represent sellers, I always call loan officer on any offer under consideration to determine how well that officer knows the buyers and, if I can wrangle it, information on whether the pre-approval amount in the letter is the maximum the buyer can borrow. You and your loan officer must be prepared for the listing agent to do the same (though sadly for their clients, many do not).
For this reason, I always try to have a conversation with your loan officer right as we're drafting the offer: to strategize the offer, to request the letter we will provide as documentation of your ability to buy, and any guidance we can give the loan officer concerning potential questions from the listing agent. Being prepared means that YOU look good in the eyes of the seller, and that is, of course, the first step to winning the contract.
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