Most Frisco TX first time home buyers focus on house hunting before they plan a good route to homeownership. Buyers spend hours and hours looking at houses online while they usually very quickly scheme through recent interest rates. Oh, it’s 4.875% today … oh, it’s gone up to 5.125% now … Yippee, it’s back down to 5%. They play with the mortgage calculators online.
Unless you are paying cash, about 95% of America needs financing to purchase a home. One very crucial part to home buying success is understanding the Loan approval process and understanding the difference between a pre-qualification and pre-approval process. This is the 2nd part of the Frisco TX First Time Home Buying series.
Frisco TX First Time Home Buyers Series – Difference Between Pre-Qualification & Pre-Approval and How to Put You In Better Negotiation Power.
Most Sellers want to know that the buyers for their homes have gone through a financing screening process to ensure that the time that they are under a contract for the sale of their home will result in a SALE! Hence, the Sellers require a pre-qualification letter from a lender with an initial offer.
A Pre-Qualification process is where a lender asks a borrower some important financial information such as annual income, job employment, plans about the home purchase and down payment towards the purchase. It involves the permission of reviewing credit report. With the review, a pre-qualification letter is usually produced subject to verification of financial assets, employment, satisfaction home appraisal of the purchase and final underwriting approval.
A Pre-Approval process includes everything of a Pre-Qualification process. However, this Pre-Approval is verified by reviewing financial documents as provided by the borrower.
Why Should a Seller Care?
A pre-qualification letter is a simple letter that simply just states that the borrower spoke to the lender and reviewed some basic information. A pre-approval letter in addition to an offer has more weight than just a pre-qualification letter. An even better proposal for the Seller would be to include a mortgage approval letter.
A Mortgage approval process based on the buyer’s credit worthiness include providing supporting financial documents* and a mortgage underwriter has reviewed the loan application for final approval pending the property that the borrower wants to purchase. In a world of mortgage un-certainties and guideline changes, a Seller can never be too sure about getting the most-qualified buyer. A mortgage approval pending property approval can help do that.
It will make your offer to purchase your first time home stand out from the crowd.Learn more about the two halves that make a full loan approval process.
*Miscellaneous Financial Documents to get ready to submit along with your loan application includes:
- Recent pay stubs (past 3 months)
- Bank statements – Checking and savings accounts (3 months)
- Previous tax returns (past 2 years)
- Other financial asset statements (401K, IRA, Roth IRAs, CDs)
Next, figuring out how much your Frisco TX first time home will cost you (Learning about property taxes, hazard insurance, etc.)
Articles in the Frisco Texas First Time Home Buyer series:
- Is Homeownership on Your Horizon?
- How to Compare Lenders and Good Faith Estimates
- Working Exclusively Is An Important Message Consumers Need To Know
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Copyright © 2009 by Loreena Yeo (3:16 team REALTY).
Frisco TX First-Time Home Buyers – Difference between Pre-Qualification & Pre-Approval and How to Put it in Better Negotiation Power for You (Part 2).