MOM KNOWS EVERYTHING
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It means you provide all your financial information to the lender, they do a credit check, and they confirm that when you find a home you want to buy, they will lend you X amount of money to buy it. You go through this process so you have an idea of how much of a house you can "afford" to purchase, based on how much borrowing power you have. |
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dougzinboston
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Duoak hit it on the head. "Pre-qualify" means the loaning institution has approved you (aka "qualified" you) for a certain maximum loan amount. You can "pre-qual" for a loan amount prior to looking, or find a house and get approved for the asking price. Smatest thing to do though is "pre-qualify" for your maximum amount so you know the price range you can look for. When you find a house and contact the agent, as you haggle for a price, you can get the bank to print the letter for the agent. The agent may ask you for the "pre-qual" letter in advance but you do have room there. Keep the business card and info from the person you talked to from the bank. If the agent wants the letter, tell them you don't have it but they can call the person at the bank to confirm they have been "pre-qualified" for a loan. If you are pre-qualified for a loan higher than the home you want to buy, the real estate agent hired by the seller may use that as leverage when you try to haggle the price downwards. |
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walkerhound03
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Being pre qualified means you have gone to the lender they pull you credit and tell you what kind of loan you are qualified for. You don't actually have the loan yet. If anything changes in your credit file or your financial situation it could change the type of loan you would qualify for.
Pre-approved means you are actually approved for a loan and as long as you find a home for the price you are approved for within the time allowed usually 90 days you are guaranteed the loan and rate approved for.
Real estate agent like to see people that are pre approved because there is no chance of having problems with finance falling through when a offer is put on a house. |
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KCD
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Still a long way to go. Good luck. |
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Cate A
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This is to let you know what you can afford. A realtor would take you to one of the lenders he/she uses and they give you an application which lists your assests and debits. They will let you know how much you can afford so that you do not end up heavily weighted down with debt. Your realto can then show you homes that you can actually afford. This saves you time and it saves the realtor time. It's a good thing. Best of luck! |
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jive
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It is a way for your agent to find out how much you can afford.
Then he or she will ask you to buy something slightly out of budget. If you can't afford, they will ask you to take adjustable loans, 0% down, borrow or cash out your 401K.
Stand your ground! Interview your agents first, trust him or her slowly.
http://nobubble2006.blogspot.com/2006/08/real-estates-agents-time-to-learn-new.html |
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edwardarndtjr
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You can pre-qualify for a loan by contacting your preferred lending institution and filing the proper applications. You and the institution agree on a set spending limit and other limitations. Usually, the financial institution issues you a letter, stating that information on your pre-qualification may be shared, with your permission. |
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capollar
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well, instead of finding a home and then applying to see if you qualify for the required amount of money
One could apply for a loan to determine what amount of money they would qualify for and then find a house within their budget |
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charlieandluella
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it means you have already gone to the lending institution, they have assessed your assets, and determined how much you can afford to pay per month. You will have been approved for up to a certain amount of money for your income |
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♠♣♥Rogue♣♥â™
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Basically, you have the money waiting for you to buy a house.
You went to a lender, did ALL the paperwork, and now all you need to do is find a house that falls into the amount they have already promised you. |
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rkaminski
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Pre-qualification is done by a lending institution or a realtor to see how much you can afford to pay for a home. They will run a credit check and reference check and take a look at your debt ratio and then come up with an amount they feel comfortable that based upon that day you can afford to pay for a home. keep in mind that I said today. Tomorrow you may decide to buy a car on credit or open a charge account and that changes everything. I am of the opinion that pre-qualification is a farce and they always over rate it because they want to make more money off of getting you into a higher priced home that you will have to pay back the biggest part of your life to the bank. |
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n3wjl
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it means the bank ahs agreed to loan you a certian amount of money for a house. |
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mixwithanything
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It means that the lending institution has enough information on hand to authorize a loan up to a certain amount for you within a certain amount of time. |
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cirestan
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Actually most of the previous answers are incorrect.
To be "pre-qualified" means you have a heartbeat. The banks/mortgage lender know you exist, know you have some type of income, and they want you to send in all of your personal information so they can see if you are even worth them wasting time on you.
When you are "qualified" a bank has sent you a written letter specifying the loan they are willing to provide you.
When you are "approved" you have discussed with the bank/lender on how much you need, they have verified the value of your investment and are willing to front the money for your purchase. If you make your purchase the terms of the loan will be in place and you will start payments on a designated date.
There is some paperwork embedded in these descriptions and it IS a little more complicated, but that is the gist of it. |
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duoak
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This is usually done before you start looking for a home. You go to the bank and the bank will tell you how much borrowing power you have, i.e. how much money you will probably be able to borrow based on your income, credit score and other factors. Then, you can look for homes in the price range for which you've been pre-qualified. |
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habitatrei
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A "pre-qualification" letter from the bank has little value. You should get a "pre-approval" letter to show commitment from the bank to actually loan you the money. Bear in mind that the bank will conduct an appraisal of the house you plan to buy, and will only lend you the money if the price you're paying for the house is close to the appraised value. So, even if the bank approves you for a $300K loan, if you're paying $300K for a house but it only appraises for $280K the bank will most likely lend you 80% of $280, not $300K (if you are getting a regular, conforming loan). |
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Allison
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That is exactly what I was going to say, capollar. Be careful because the bank always seems to think you can afford more than you really can. Finances always come out great on paper but I would strongly suggest staying well below what you are approved for. |
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Joker
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It's a fishing expidition put on by the financial institution. Basically you have good enough credit to get a loan they just need additional information to see how much they're going to rake you over the coals on the interest. Mostly these letters find their way to people on the low end of the credit scale. |
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