The loan pre-approval is not an option. Not even for one second.
I could tell you so many times that I’ve had people come to me and they say well no no no, I know I will qualify. And then what ends up happening is we go through the buying process, and we find a house, and we’re in the process of getting their loan approved and oops, forgot about that one thing they didn’t tell the lender, right?
Sometimes people don’t realize that they may have other liabilities. It could be debt, judgments or something from the past that may still be haunting them from the past that is gonna prevent them from getting that loan approval.
And I’ve had several super smart people say, “no no no no no, I’ve done my homework. I already know that I am approved” to only get slapped right in the face when the lender calls them up and says you don’t qualify.
So getting the loan approval is critical.
What you don’t wanna do, especially if you’re a first-time home buyer, or any home buyer for that matter, it doesn’t really matter. You don’t wanna go out there and think that you’re approved for a certain amount, and find THAT house, let’s call it $600,000 dollars. You think, wow, this place is great. And then start the loan approval process, only to find out that, oops, they only qualify for $575k. Okay, not that far off. But the problem is that you will never ever ever find that same house that you thought at 600,000 dollars was amazing, and the best house for your and your family, you already have it in your mind that you could totally live here, raise a family, do whatever. You’re never going to find that same house for 575.
So at some point in time, you’re gonna do one of two things. You’re going to become like the guy that I had mentioned in the previous video about waiting, waiting, waiting, waiting until it’s perfect, or you’re gonna settle, right?
So I can’t say it enough times, best thing to do is get the loan approval in advance.
Let’s clarify the loan approval.
Understand there’s three primary types of approvals that are offered.
There is the pre-qualification, there’s a pre-approval, and then there’s an actual approval.
Pre-qualification is basically you having a conversation with a lender, doesn’t matter where it is, could be at your bank, could be a loan officer, could be a broker, could be somebody that I recommended. They look at your application or just have a conversation with you on the phone and they take a little bit of information and they say, okay, well, you’re telling me you make this much in income, you’re telling me that your credit is probably this good, you’re telling me this is what your debt looks like. Based on that, you’re pre-qualified for $X amount of dollars. So now you get that number stuck in your head. After all it’s what you’re pre-qualified for.
Pre-approval is a little more in-depth, and by the way you don’t wanna do the pre-qualifying thing. It’s a waste of time. You wanna do the pre-approval at the very least. Pre-approval requires that you have to actually provide documentation. Here’s proof of our income, here’s our bank statements, our pay stubs, our tax returns. Whatever it is for the lender to look at it, for the loan officer to look at it and say okay, I can see that you make this much income. Oh, oops, you had write-offs and things like that that brings your income down, which maybe you didn’t consider. And so they get the documentation, they run your credit, they actually see what debts and liabilities you have and they say okay, now, based on all of this actual information, we can give you a more accurate number. But keep in mind things change as you’re going through the process. If you’ve gone through the house hunting process for months and months and months, rates could go up and go down, the markets could shift, loan programs can change. So, you might qualify for this one special loan program, it may be gone by the time you end up finding a house. So you have to stay on top of those things.
Obviously Underwriters Approval, in the end, requires that you have found a property, you’ve gotten into escrow, and you end up getting an appraisal or whatever is necessary on the conditions for that loan. So, definitely, please please please no matter what you do, make sure you get your loan approval before you even start looking for a house.
You don’t wanna be disappointed to find the house of your dreams, to find out that you’ve qualified for less and you can’t afford it and now you have to settle. Or maybe, this has happened too, where you find a house and you think you’re only pre-qualified for 600k, and then you move in, and the lender comes back and says oh, well you could have qualified for 675 for the same payment if someone would have done an actual pre-approval, right? Something like that. So, get your pre-approval out of the way, get it done. If you need to talk to a lender, feel free to reach out to us, or call someone you trust.
Pre-Qualification…BAD
Pre-Approval…GOOD
Full Underwriter Approval…BEST