[Financing]
Is Getting Pre-approved for a Home Loan the Same as Pre-qualifying?
When you want to make an offer on a house the seller will want to know whether you’re pre-approved or pre-qualified for a loan. What difference does it make?
What’s the difference?
Many say that pre-qualification is the preliminary step in the mortgage process, where a lender runs your credit and talks to you about your goals, and pre-approval takes it one step further by requiring verification of your pay stubs and tax returns.
So which one do you need?
What will make the sellers confident to accept your offer. So make sure you understand what you’re getting, and find out exactly how your lender defines “pre-approval” or “pre-qualification.” Talk to your BoardWalkPremierrealty.com to determine which is more credible in your market.
Regardless of what your lender calls it, you’ll receive a letter that states they are willing to let you borrow a specific amount of money. Neither is an offer to lend, a commitment to make a loan or a guarantee of specific rates or terms. The lender will want additional documentation and will need to do an appraisal of your new home before actually extending a loan.
That means even though you have the pre-approval letter in your hands, this is NOT the time to go buy a new car, quit your job or run up credit card debt. Any big changes to your finances or debt load are likely to be picked up once you actually apply for a mortgage loan. Lenders aren’t committed to give the buyer a loan. A lot of buyers think once they’ve got a pre-approval letter they have to use that lender. You don’t have to use any lender you do not wish to work with.
What you’ll need
To get pre-approved you will likely need to provide the following documentation:
- Your W-2 from the past two years
- Your pay stubs for the past three months
- Your tax returns from the past two years
- Your checking or savings bank statements for the past three months (this will likely show your down payment funds as well)
- Statements for all your other assets (stocks, bonds, retirement accounts) for the last two months
- The name and phone number of your landlord (if you are renting) or your current mortgage documents
- Your divorce decree, if applicable
- If you are self-employed: Your business tax returns for the past two years in addition to your year-to-date profit-and-loss statement and year-to-date balance sheet
- Your Social Security number and permission to pull a credit report. (Many lenders will pass on a $30 fee to pull your credit.)
How do I get approved for Contract for deed financing?
All situations are different sometimes the seller will not ask for anything. They are more concerned with the Down payment. Other times sellers have asked for a tax return-credit report-proof of funds-proof of employment. Some sellers will go to an in-depth application. Most will not go thru all these options. The main thing is the buyer has the required amount for a down payment they are seeking and employment to make the payments.