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Lender Pre-approval Gives Home Buyers an Edge

Written by Cathie Elliott
Clarke Agency Gunnison, Colorado

When people go to buy homes and even vacant land, they are often in competition with others who want to purchase the same home. This is especially true of homes and condos under $125,000. However, there is something buyers can do to gain a competitive edge when making an offer on a home. This “edge” is called pre-approval for a loan and is different than prequalification.

prequalifying for a loanPre-approval means the buyer has selected a mortgage lender, completed the qualification process and credit approval. All that is left then is to identify the home to buy, get an accepted offer in writing, and have the lender order an appraisal. In other words, pre-approval means the lender has agreed to lend the pre-approved amount to the buyer, subject to the appraisal.

How should a potential buyer select a mortgage lender? Consider lenders that have proven stable and easy to work with in the past. Often family and friends can make recommendations based on their positive (and negative) experiences. Realtors can provide guidelines and suggestions about selecting a mortgage lender. They can also discuss other factors affecting loans such as interest rates, discount points, loan commitments and interest rate locks, as well as service and timely processing of mortgage loans.

Besides placing the buyer in a better negotiating position, being pre-approved gives the buyer and the Realtor a clear idea of price range at which to be looking.

There are some caveats of loan qualification. Don’t ever borrow the down payment without disclosing the loan to the lender. In addition, do not submit false letters of credit or gift letters, or make secret financial arrangements. Also, accurately list income and assets, debts and other expenses.

The lender will probably charge a credit report fee (about $65) which will cover the cost of having credit history examined. Credit reports include bill payment history, as well as information on bankruptcies. If the buyer’s ability to obtain a mortgage is adversely affected by the credit report, a challenge can be made to its accuracy and corrections made. A credit report during the pre-approval process will give the buyer time to make corrections and explanations while there is time. The credit report is part of the information the lender uses to determine qualification for a loan. It’s not a mechanism to prevent borrowers from borrowing. Lenders want to make loans, not turn them down.

By going through this process before contracting for a home, the buyer will be able to handle any surprises that may arise. When the loan approval process is slowed down as a result of loan qualification delays, it may jeopardize the home purchase. So, get an edge on the competition by visiting a lender and getting pre-approved.

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Gunnison Real Estate
The Clarke Agency, Inc.
241 N. Main Street
Gunnison, CO 81230
Telephone: (970) 641-0511
Office Fax: (970) 641-9252