You have heard me talk about buying investment properties in Breckenridge quite a bit, but here is another piece of the equation. Some people pay cash but most get a new loan so in this busy market one way to get an edge up on the other guy is having your loan in order. There are two phrases used interchangeably but they are not the same.
Pre-Qualified vs. PreApproved
This is a quick step, and the first step in that it shows you have spoken to a lender, submitted some basic information and they have let you know what you are qualified for, and have looked over your information. It is not a sure thing, but it give you an idea of what price range you should be looking within. The lender will then give you a letter that states upon first review it looks like you would qualify for a loan.
A mortgage preapproval takes the process to the next level. Preapproval
means you have spoken to a lender and they are going to ask you to provide proof of your financials, what is your debt level, basically see how financially stable you are. The lender will verify your income, employment, assets and debts, and will check your credit report.
You’ll provide information in the form of W-2s, a current pay stub, a summary of your assets and your total monthly expenses, and if you already own real estate, a copy of your mortgage statement and home insurance policy.
If you satisfy the requirements, you’ll get a preapproval letter, which states the amount and type of mortgage the lender is willing to offer, along with the terms. You can show the letter to sellers and their real estate agents when making offers on homes.
A preapproval offer isn’t a guarantee, but it shows you’re a serious buyer, which can give you leverage in a competitive market as it will make the seller feel more comfortable with you and you will seem less of a risk as they take their property off the market once you have come to terms on a buying contract.