Are you pre-qualified or pre-approved for a loan?
Before you begin to shop for a new home, you should set up a time to meet with John Arvanitis, senior loan officer – since 1985, so we can figure out how much you can afford. This is the single most important thing to understand as a prospective home buyer. It is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house in Sacramento or anywhere. Sacramento real estate in particular is full of forclosed homes, and listing agents for such properties will examine your pre-approval or pre-qaulification very carefully.
To get pre-qualified for a loan, we collect information about your debt, income, and assets. We’ll look at your credit profile, your employment history and your ability to provide a down payment. We will also discuss different loan programs that may be available to assist you in your purchase. After, a pre-qualification letter will be issued indicating the amount you are pre-qualified to borrow.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount. In fact, it is almost required for most properties on the market now. A seller will view how much work you have put into arranging financing, as a representation of how serious you are about purchasing a home, and the seller’s property in particular.
To get pre-approved, you will complete a mortgage application and provide us with various information verifying your employment, assets and financial status such as W-2 forms, bank records and credit card statements. We’ll submit your application to the lender that best meets your needs for approval on a standardized approval system. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
When dealing with forclosures, some large banks such as Countrywide or Wells Fargo require their own pre-approval, regardless of the lender who has pre-approved you. Such forclosed properties will generally require this pre-approval be done with a local branch of the bank, prior to submitting your offer. You should always speak with your loan officer prior to doing this, as additional credit pulls could jeapordize the status of your pre-approval. Be carefull also, it is common in these situations for the bank loan officer to suggest or imply that your commitment to that bank (to use their mortgage) will place higher priority on your offer. This is not the case; such discrimination is a violation of both State and Federal law. It is also common that bank loan officers will seize advantage of the situation and try to get your business by qouting you rates. It is important to realize that banks and brokers all get their money from the same place, and nobody has a pocket of special, lower rates. If you do recieve a qoute in this situation, you should always allow your loan officer to help you compare and contrast.