Pre-Approval Definition vs Pre-Qualified Home Loans
A lot of clients, buyer or seller and some real estate professionals lack understanding about the substantial difference between a pre-approval definition and pre-qualified home loans and unfortunately cost some the dream of buying a home.
There are several reasons both Realtors and sellers want buyers to fit the pre-approval definition as it means the buyer has spoken to a lender and has the financial capacity to follow through on a purchase.
Savvy Realtors that are going to help list a property also want the seller to get pre-approved if the Realtor is going to help them with a home purchase as well before listing the current property.
Pre-qualified home loans are a positive signal, but not as concrete as the pre-approval definition.
A licensed mortgage lender collects basic information like income, debt, assets provided by the buyer, often online and the home loan amount is only an approximation based on superficial information.
By the pre-approval definition, the mortgage lender actually pulls the credit score, determines the debt to income ratio, vets the buyer through careful examination of tax income documents, proof of income, verified employment and assets.
The loan officer can then offer the buyer the best loan product and lowest rate possible with regard to verified down payment amount funds.
Avoid the Disappointment of a Collapsed Deal
It’s a truly heartbreaking and maddening thing for all parties involved in a sale and purchase when an offer is submitted, only to find out the buyer needs to correct something on their credit profile, which can take months.
It the time it takes to get credit information corrected, the home the buyer had their heart set on will likely sell to better-prepared buyer. Pre-approval is everything.
It’s also crucial that once an offer is accepted that buyers protect their credit like an uncooked egg carried all day every day in their pocket and must be mindful of how fragile it is. Even a small purchase on a card, a new account or closing an existing one can drop your score enough or change your debt-to-income ratio enough to kill your pre-approval.
As my business partner Marty Snyder and I are active real estate professionals, I can tell you that time is precious. Try spending two months showing properties to someone who isn’t, can’t or blows their pre-approval.
As professionals, it’s our job to guide buyers and sellers and this topic is of particular importance.
It’s true for home sellers too, if they intend to list with us and also buy another home whether through us or another Realtor, pre-approval speaks volumes. The problem with some sellers is their belief that the fact they own a home means they’ll easily meet the pre-approved definition and neglect monitoring and if needed, correcting the credit picture and debt-to-income requirements.
So, it’s no small wonder real estate agents and Realtors everywhere are reluctant to work with anyone who doesn’t meet the pre-approval definition.
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