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The Blog

Monday, September 29th, 2014

Realtor View: Mortgage pre-approval makes offer attractive

Source: Chaille Ralph for TheChron.com (9.26.12)

Before you submit an offer on your dream home, get pre-approved or pre-qualified for a mortgage loan. Either one can make your offer more attractive to the seller, but they mean different things.

Qualifications?

To get pre-qualified for a mortgage loan, you provide a lender your approximate income, current debts and any important details from your credit history. The lender will use these details to determine how much you may be eligible to borrow. You may receive a Conditional Qualification Letter from the lender, which determines your likelihood of getting a home loan. However, it’s important to know all information submitted during pre-qualification is subject to verification when your actual loan application is submitted. There is no guarantee you will receive a home loan until your financial situation is verified.

Seeking approval

Being pre-approved for a loan typically means the lender has verified your financial situation. When you get pre-approved, you will complete a mortgage loan application and may have to pay an application fee.

Your lender will commit in writing to fund your loan, but only after an extensive examination of your financial situation and pending a successful appraisal of the home and a few other conditions.

Haven’t found a house yet?

Being pre-approved doesn’t mean you are borrowing the money or you are obligated to. It means the lender must stand behind his written commitment to fund the specified amount unless something changes with your situation. Think about how attractive your offer will be to the seller if you submit it with a letter pre-approving you.

Can the lender change his or her mind?

Some situations could cause a lender to withdraw from funding a loan even after a pre-approval letter is issued. If your credit situation changes between the time the pre-approval letter is issued and the loan’s funding, then the lender could change the interest rate or deny the loan application. So, while you’re buying a house, it’s important not to apply for credit cards or other loans that could change your credit situation.

Avoid surprises in your credit

The best way to check what a lender is going to see in your credit history is to get a copy of your credit report. By law, you are entitled to one free credit report every year from each of the three credit-reporting bureaus – Experian, Equifax and Transunion. Visit AnnualCreditReport.com to find out how to get free reports.

For more information about buying and selling property, visit TexasRealEstate.com and HAR.com.

Chaille Ralph of Heritage Texas Properties is the 2014 chair of the Houston Association of Realtors.