Understanding pre-approval

Pre-approval is an optional step of the mortgage loan application process, but it many experts recommend it. Simply defined, pre-approval is an application process that takes place before the borrower finds an actual house to buy. The process requires most of the paperwork of a proper application.

It is important to understand the distinction between pre-approval and pre-qualification. Pre-qualification requires far less paperwork than the pre-approval or application processes. More importantly, lenders who provide pre-qualification to borrowers are not obligated to approve their mortgage applications.

While some people may consider it extra work, pre-approval can ultimately make the loan application process much easier. For one, it prevents of the stress and anxiety that can go along with an application that is being processed after you have already found a home. You will not have to agonize about whether or not you will be approved.

Furthermore, pre-approval should give you a pretty good idea of what kind of house you can afford. Knowing your price range can make house hunting a little bit easier because it narrows down your prospective houses.

Most importantly, pre-approval can be a great bargaining chip when you are making an offer on a house. Since they know that you are guaranteed financing, sellers might be willing to compromise on the price of the house.

To obtain pre-approval, be prepared to provide your lender with detailed information about your finances. The validity of the information you provide will be researched by the lender, and your viability as a borrower will be carefully considered. Then, if you are pre-approved, you will be given a special letter that proves your status.