Spokane Mortgage Pre-approval
The Main Reasons For Getting Your Spokane Mortgage Pre-Approval in Advance
Some people make the mistake of initiating their quest for a new Spokane home by searching the Spokane MLS for a home they like. However, the correct place to start might be to determine how much you can afford and are comfortable paying in your monthly budget? and that means meeting with a loan officer to get pre-approved for a loan.
When you work with your loan officer to get pre-approved to purchase Spokane real estate, the lender will review your income and assets and the terms of the loan to determine the actual loan amount you will most likely qualify for. This instantly lets you know what your actual budget is.
When you begin home shopping, knowing what you can afford from the outset sets the scope of your home-buying strategy and will help you and your real estate agent better focus your efforts to find the best home for your money.
Pre-Qualification vs. Pre-Approval
Don't make the mistake of assuming the terms pre-qualification and pre-approval are interchangeable. They are not, and the distinction is an important one.
When a homebuyer is pre-qualified, the lender performs a quick check to determine how large a home loan the buyer can afford. The lender looks at basic information on income, the balances and payments on current debts, and how much money has been saved for a down payment. Qualifying ratios are applied to those figures to determine what percentage of your gross monthly income can be used to pay for the home loan and attached expenses. Essentially, when pre-qualified, the lender is saying it would "most likely" approve the buyer for the amount. At the end of the day, pre-qualification is an approximation, a sort of educated guess at what the borrower can afford.
Pre-approval, on the other hand, goes much deeper. During pre-approval, the lender examines and verifies your debt, income, savings, assets and credit report to ensure you can repay the loan amount. Where pre-qualification is a sort of educated guess of the buyer's purchasing power, pre-approval says the prospective borrower would definitely be approved for the loan.
The Pre-Approval Process
The pre-approval process centers on documentation. The lender is trying to confirm how much you earn, your savings and your other financial assets. The loan officer will ask you for a number of documents ranging from pay stubs to bank statements to investment account statements. Also, the lender will order a credit report to check your credit rating.
Your documentation will then be reviewed against various qualification requirements, and, when it has been determined that you meet them, you will be pre-approved for the loan. Your lender will provide you with a letter or certificate stating that you are pre-approved for the amount. You'll also be given a good faith estimate detailing the amount and terms of the loan, such as closing costs and whether the loan is fixed or adjustable.
Note that while the lender is saying it will approve you for the loan, a pre-approval is still not a guarantee that it will do so. Other factors can affect the lender's ability to fund a home's purchase, such as the results of the home appraisal, proper insurance and titling, so while the lender says it has approved you for the loan, it cannot commit to the financing 100 percent until it has reviewed the home you decide to buy.
A Bargaining Asset
In a real estate market such as this one, your pre-approval letter becomes an incredibly powerful bargaining tool. While it is generally accepted that the current real estate market is a buyer's market, home sellers are still being cautious about accepting offers, because so many buyers' funding can best be described as "tenuous." The last thing they want is an offer from a seller that doesn't truly have the necessary funding.
With a pre-approval letter, the seller can have complete confidence that the offer you make will be one they can rely on. That kind of peace of mind can often result in a very happy transaction for buyer and seller alike. (That said, never make the mistake of submitting a pre-approval letter detailing a dollar amount more than your offer.)
Clearly, from initiating the home-buying process, all the way through making an offer, pre-approval is the central element in ensuring that you get the loan and home that are right for you.