October 23rd, 2017 7:22 AM by Jackie A. Graves, President
for a home before getting preapproved for a mortgage is the equivalent of
walking into a grocery store without a wallet. Yet, the vast majority of
homebuyers don’t get a loan preapproval for the house hunt. So, what is a
preapproval? For one, a preapproval is different from a prequalification.
lender relies on information provided by the buyer to estimate how much the
borrower could qualify for.
lender verifies the borrower’s information and documentation to determine
exactly how much it would be willing to lend to that borrower.
documents to get preapproved are the same documents that you would need to get
a mortgage,” says Jordan Roth, mortgage specialist with Guardhill Financial
Corp. in Glen Rock, New Jersey.
sure there are no mistakes on your credit report. Get your report
for free at myBankrate.
preapproval is not a loan commitment, but it helps speed up the underwriting
and loan approval process, Roth says.
are three reasons it’s better to get a mortgage preapproval before you
go house hunting.
often are eager to start looking at homes and tend to leave what they view as
the boring, bureaucratic part of the homebuying process for last, says Michael
Highfield, associate professor of finance and head of Mississippi State
University’s department of finance and economics.
in this competitive market, any serious buyer should pursue a preapproval from
a lender in advance to beginning a home search,” he adds.
Real estate and
loan professionals say it’s common to come across buyers who skip the
fact, less than 10 percent of buyers who got a mortgage in 2016 got preapproved
by the lender who originated the loan, according to a Bankrate analysis of data
from ComplianceTech’s LendingPatterns.com.
happens every day,” says Patty Da Silva, a real estate agent
and owner of Green Realty Properties in Davie, Florida. “I can’t believe I
still get offers today without a preapproval.”
with many other agents and sellers, Da Silva says she rejects offers from
buyers who don’t have preapproval letters from their banks.
have to have a preapproval and it must be a real preapproval where the lender
has verified not just your credit, but bank statements, tax returns — and I
call the lender to verify that,” she says.
for a mortgage today.
No. 3: You need to know where you stand
buyers put off the loan application because they fear a lender may not approve
them for the amount they plan to spend to buy the house, Highfield says.
like when people don’t go to the doctor for their annual checkup when they are
afraid to find out what’s wrong with them,” he adds. “That’s the same thing
with getting preapproved.”
simply don’t want to share an abundance of private information with a lender
until they actually find the home they want, he says.
You are beyond compare
you pay your bills on time and earn about the same as the friend who just got
that $300,000 mortgage, don’t assume you qualify for the same loan.
credit score difference of 700 to 680 can severely affect one’s ability in
terms of down payment,” Roth says.
preapproved before you shop for a loan also allows buyers time to fix
unexpected errors on their credit reports, Da Silva says.
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