Mortage Prequalifications and Preapprovals for Boise, Eagle, Meridian Residents
One of the first things you should do when considering a real estate purchase is to get your financing in order. For most buyers this means meeting with potential lenders to start the process that will determine how much they would be willing to loan to you based on many factors. This process will give you a rough idea of what you can afford so you can remain within those parameters when shopping for a home.
When starting the process of obtaining a loan for your real estate purchase it is important to understand the terminology being used.
Prequalification can be obtained by providing the lender with some very basic information about your financial status including your income and debts. Based on this limited information you lender can provide you with a pre-qualification which is an estimate of what the bank might be willing to lend to you. While the prequalification doesn’t have as much value as a preapproval it can be issued quickly to satisfy a seller while the loan officer gathers more documentation to complete the file.
Preapproval is a more in depth process in which the lender will actually verify your financial background. You will be required to provide a variety of documentation including tax records and bank statements. Your credit score will be checked. An underwriter will examine and approve your application, giving it more weight than a prequalification will, and giving you a more accurate idea of how much you could borrow for your purchase.
There are many benefits to getting preapproved for a home loan.
- Knowing your price range will allow you to look for homes that meet your criteria.
- Narrowing your focus : Having a complete preapproval will allow you to focus on finding a home that meets your needs instead of having to divide your time between searching for homes, evaluating the features, benefits and price of the home you are considering and financing issues
- Negotiation power : Being able to demonstrate your solid financial ability to purchase a home allows the seller to accept an offer with confidence knowing you are a serious buyer.
Preparing to Purchase Your Home
While it is important to get started with a loan officer, getting a preapproval doesn’t guarantee your loan or obligate the lender in any way. In order to get a final approval from the lender your file will need to go through a complete underwriting process. That doesn’t happen until you have made an offer on a home, at which point they will need a copy of purchase and sale agreement so they can complete their evaluation of you and the property.
Being prepared for the financial aspects of a real estate purchase before starting to identify potential homes will lend itself to a smooth transaction for everyone involved.