Q: “Help! I just saw my dream house when driving to my son’s soccer practice last night. While he was at practice I called the agent whose name appeared on the “for sale” sign posted in front of the beautiful Victorian. As I summoned the agent to show me this house, he asked me if I had been pre-approved to make this purchase.
I stammered… ‘well’, I said, ‘I have good credit, I pay my rent on time, no collectors are beating on my door… what do you mean… pre-approved? I even got a flyer in the mail from some local lender saying that I was pre-qualified.’
The Realtor advised that I would need to get pre-approved and then call him back; then he would be happy to show me this house. I was stunned! Why do I need to be pre-approved just to get to peek at this house?
A: First of all, while I am not a Realtor, I am sorry you were not able to see that cute little house. But I will take a gander and imagine that if you are asking someone to show you a house, and I mean asking them to get away from their evening activities, drive over to the house, show you around and answer all of your questions, all without knowing if you would even qualify to buy this house, this is really asking a lot. I can see if the Realtor was holding an open house, then sure (any Realtors out there who would like to comment on this part… you are encouraged to do so…).
Okay, now on to the part of your question that I can answer with certainty: Pre-qualified vs. Pre-approved.
Definition: Pre-qualified means a loan officer has determined a borrower is financially able and credit worthy to qualify for a certain loan without actual verification. Pre-approved means that all documentation, such as a credit report and income information, has been reviewed and verified.
So let’s go back to your purchase example: You have decided that you would like to buy a home. You’ve been renting for too long, and you want the pride of home-ownership; to pick your own wall colors, add a room or invest in some great landscaping. You decide to call your best friend’s father’s first cousin’s loan officer who helped him buy his very first car back in 1950. You explain your understanding of your credit status, you disclose how much you make each month and how much you have in the bank and your retirement account.
Mrs. Loan Officer advises that based up the information that you have discussed, you are pre-qualified to purchase a home for up to $250,000.00 with an FHA home loan; you must bring in 3.5% of your own funds for a down payment, and the seller can contribute 3% toward your closing costs. This of course includes your taxes and insurance in the monthly payments.
Fast forward: you are driving on the way to your son’s soccer practice and see that dream home. You see that it is listed for $220,000.00. You call your favorite loan officer and make an appointment for the morning to review your actual credit report, your pay-stubs, W2s and tax returns, your driver’s license and your bank statement and retirement account statement. Your fave loan officer also knows a great Realtor who can properly represent you in the purchase offer and transaction.
Your loan officer meets with you and verifies your information. Luckily your credit really is great, and your actual income really matches what you thought it was. Even your 401k is till in tact. You now receive your pre-approval letter. You call your new buyer’s agent who calls the listing agent and off you go to make that offer on that gorgeous Tudor (you saw another house along the way to your loan officer meeting).
Now that you have the basics… you are almost ready to go get that house you’ve been dreaming about. For that all important loan officer meeting, call me, Audrey Roth, a loan officer with over 15 years of experience in the lending industry, at 253 320-1811, or contact me by email at aroth@seattlemortgage.com.
If you don’t qualify today, then we can work together to get you on the path to make it happen.
