Let’s learn more about loan pre-approval

First let’s check the meaning of it. Based on Wikipedia this is the meaning of PRE-APPROVAL-

 

 “People interested in buying a house can often approach a lender, who will check their credit history and verify their income, and then can provide assurances they would be able to get a loan up to a certain amount. This pre approval can then help a buyer find a home that is within their loan amount range. Buyers can ask for a letter of pre-approval from the lender, and when shopping for a home can have possibly an advantage over others because they can show the seller that they are more likely to be able to buy the house. Often real estate agents prefer to work with a buyer who has a pre-approval as it demonstrates that they are well-qualified to receive financing and are serious about buying a home. A pre-approval is based on the documentation the borrower supplies at the time of application, and any actual eligibility to receive the pre-approved loan depends on the terms and conditions of the pre-approval and ability to secure the loan before the pre-approval expires. ” https://en.wikipedia.org/wiki/Pre-approval

Remember in the Real Estate world, when you are buying a property you have different financing terms to use, cash or loan. Most of the time people tend to use the latter in financing their dream to buy their new home. Hence Pre-Approval is very important in the Real Estate process. It is the way you can convince the seller of the property that you are capable of providing the financial aspect of the sale. That is how we see it on the borrower’s side.

 

On the lender side, here’s how it goes. Prior to helping anyone with buying their dream house, they need to do several things, checking the information of the borrower, their financial history, credit report and score and other financial information to check if they will qualify and pass their guidelines in providing grant to their loan request. This is to ensure that the person has the ability to pay them back, there are even times that borrowers may need a co-maker or even a co-lateral just to be approved for the loan for the lender’s assurance that they will be able to get their money back plus the interest and other fees, after all it is the nature of their business.

Once you have a pre-approval letter from your lender, you already have a pretty good idea of how much you can get to finance your house hunt; this can help in filtering the number of houses as your options. You already have a price range of the house that you are looking for. Also some sellers may ask for a copy of pre-approval letter together with your offer so that they are secured that you are a serious buyer and has the means to get to the closing of the transaction.

Remember, especially in a transaction with multiple offers, you have to make sure that your offer stands out and having a pre-approval letter is plus for you.

That’s why my tip for you if you are looking into buying a property, before getting your mind so much into house hunting, secure a pre-approval first. Trust me it will save you, time and energy even heartache, ha-ha! Happy House Hunting!