Preapproval vs. Prequalified When Buying a New Home

by Hank

If you are currently thinking about purchasing a new home, make sure you are prequalified with a lender first before you set off on your search. At least, that way, you are assured that the bank or financing company believes you qualify for funding. This will save you, your real estate agent, and the seller’s agent time and money.

preapproval vs prequalifiedIf you want to make sure that you are not wasting your time or the seller’s, obtaining preapproval is even better than merely being prequalified. It makes it that much easier for you to negotiate, especially if you find your dream home. It will be one less step that could hold you up and also give you and edge in the negotiations. It shows that you are a serious buyer. Should you and another individual make an offer on the same house, you are in a far superior position if you have already established the fact that you can get a loan from the bank.

To obtain preapproval then, you have to be armed with a variety of financial documents to satisfy the bank’s curiosity. And, now, they are more curious than ever in order to protect their interests in the light of the mortgage meltdown of the past couple of years.

You will need…

• Your tax forms, including W-2s, for the past couple years and Federal returns for the same length of time to prove that your income can support the mortgage payments. No longer will banks lend on your word or stated income alone.
• A listing of what you owe, such as auto loans, credit cards, student loans, alimony or child support. The bank will find these things out when they pull your credit report, and they will want you to account for every single one of these. I had to explain intricate details on my pay stuff thanks to additional notes on my pay stub my employer adds.
• A listing and documented proof of the assets you currently possess
• Bank statements
• Mortgage or rent payment documentation if you still have home loans outstanding

There are many more hoops that buyers have to go through when they get preapproved for a home mortgage, but they are worth it in the long run if you are serious about buying a new home. Prequalified by a lender is almost a waste of everyone’s time nowadays. You should take the time to get preapproved and be done with that portion of the home buying process. It will be one less thing off of your mind at a time when there will be so much to think about that will distract you.

It is still a buyer’s market in the home buying sector of the economy. Buyers are in the driver’s seat, and you have to take advantage of that fact. One of the best ways to do that is to get preapproved for a home loan. Knowing how much you can borrow in order to pay for a new home will give you confidence and knowledge, a slight advantage over the seller when it comes to negotiations.

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