In a competitive market like Austin’s, it’s important for buyers to be prepared while shopping for homes. Being pre-qualified or pre-approved for a home loan can help give you a leg up when faced with stiff competition for the home of your dreams. We’ll help you understand the difference between these two terms and how they relate to buying a home.
Pre-qualification is the first step of the journey to your final mortgage. When you meet with your trusted lender, they will review your basic financial information, including your income, debt, tax returns, and other assets, to generate an estimate of how much you can expect to be approved for to buy a home. Your lender will provide you with a letter showing you are pre-qualified for a loan which you can submit to sellers along with your offer on a home.
Since pre-qualification only provides an estimate of an amount you qualify for, it’s not an exact amount and doesn’t carry the same weight as a pre-approval letter from a lender. However, pre-qualification is a solid step to showing a seller you’re ready to purchase a home. It’s also a good time to review your mortgage options with your lender before committing to a certain type of home loan.
While pre-qualification is a relatively easy process, pre-approval is more intense. To be pre-approved by your lender, you’ll fill out a mortgage application and supply the necessary documents so they can examine your financial history. Your lender will also run a credit report at this time. Once all the paperwork is submitted and reviewed, your lender will present a pre-approval letter listing the exact loan amount you qualify for.
Pre-approval can give you an advantage over other buyers because it shows the seller you are financially ready to buy a home as verified by a lender. You don’t have to list a specific property on your pre-approval letter, but it’s important to shop for homes at or below the pre-approved amount. Once you’re pre-approved, you can work with your lender to choose the best mortgage option and possibly lock in a good rate.
We hope this helps you understand how you can get a step up on the competition for buying a home. Want to learn more about home financing? Check out our Financing an Austin Home page for more info. Our agents are also happy to recommend trusted local lenders and help you find the home of your dreams. Contact us to start working with one of our expert agents.