Do You Need a Loan Pre-Qualification or Pre-Approval to Buy a House in Denver? - Sage and Sparrow
What’s the difference between Pre-Qualification and Pre-Approval?
Before you begin to shop for a new Denver home, you should set up a time to meet with a lender to figure out how much you can afford. This will put you in a better position as a Denver home buyer. That’s when it’s important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, your lender will collect information about your debt, income, and assets. They’ll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. Next, he or she will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.
It’s important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a Denver metro home because you have been approved for a loan for a specified amount.
To get pre-approved, you will complete a mortgage application and provide various information verifying your employment, assets and financial status such as W-2 forms, bank records and credit card statements. Your lender will review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
If you are interested in buying a home in Denver, call us at 303-489-4035 for additional tips and tricks for starting your search.
Information courtesy of Colorado Mortgage – www.co-mortgage.com.