The joy of finding your dream home is often shattered when the prospective home buyer realizes they are unable to get approved for the mortgage they will need to buy their home. Sadly, many of these buyers go into the search phase thinking they have more buying power than they do because of a misleading tactic of some lending companies.
Have you ever received a credit card offer in the mail telling you that you were pre-qualified for a $10,000 credit card? When you applied, where you actually turned down and offered a lower-limit card with a higher interest rate? It is not necessarily bait and switch, but it is pretty close.
That concept is something home buyers often find employed by real estate agents and/or brokers trying to land their business. There is a significant difference between being pre-qualified and being pre-approved. And it is a difference that can lead to either heartbreak or joy when you eventually find your dream home.
Virtually every realtor site you will explore during your hunt for your new home will feature a pre-qualify or pre-approval link. It is a tool that is meant to help you explore homes within your purchasing power. Unfortunately, the pre-qualified number received is more or less worthless.
This is NOT a promise from the lender, but rather a ballpark estimate of what you may be eligible for if you decide to move forward with a purchase. In most cases, the decision is based on limited information given during a quick capture form. Rarely will it include information based on your actual income, assets, liabilities, and credit report.
Rather than have a “ballpark figure,” those serious about buying a new home are much better served to find a lender that will give them an actual pre-approval, or a real promise as to the maximum mortgage they will be able to obtain when they find their home on the market.
More importantly, a pre-approval gives you a significant advantage over other buyers when you make an offer on the home. While it may not be cash in hand, for the seller’s purposes, it is just as good. They know before accepting anyone’s offer who has the actual buying power to back up the offer being put on the table.
In its simplest terms, your offer is reliable, whereas other offers may not be simply because they have no idea if their mortgage will be approved or not.
To use our preferred lender for pre-approval, click here.