When buyers get the itch and inspiration to shop for a home, they want to know what homes are for sale on the market. Today’s shoppers commonly go on-line to search. Others will jump up and contact a realtor in order to receive a list of homes for sale. The next impulse is to get out and get viewing! Most buyers do not realize that a smart home purchase begins not with finding the right home, but finding the right loan. Savvy buyers should first discover how much home they can afford before they shop. And remember: when shopping for a loan request to be preapproved, and not just pre-qualified. How do the two differ?

     A loan prequalification involves talking to a loan officer and telling them how much you earn, and what your debts are. Most lenders will typically request to know your last two months income, how much money you presently have in all existing bank accounts, and your last year’s income based upon your tax returns. The loan officer will then crunch the numbers through a formula and will come up with a monthly mortgage payment. You may also receive a letter stating you now are “prequalified” to purchase.

     A loan preapproval, on the other hand, involves the same steps above, but there is a huge difference. When you receive a loan preapproval letter from a lender, the lender is actually committed in writing to funding your loan. There are some conditions, however. The home must appraise at the purchase contract price, you must show a record of clean credit, and the financial paperwork submitted to the lender must match what was verbally related to them. A reputable mortgage company will also run your financial and credit information through their underwriters before a preapproval letter is issued to you. This important step will insure the purchase process will be extra smooth, and there will be no glitches with the loan at the end of escrow.

     And, a final word of caution. The internet now allows buyers to be preapproved on-line from lending websites, whereby a written preapproval letter can be received almost instantly via email. Watch out and make sure this type of lender has received and run your credit and financial information through the office that will actually underwrite the loan. Some lenders are “print happy” and will issue a letter that states “preapproval”, when in fact there is no financial checking whatsoever. This type of “prequalification” will be trouble down the road at closing time.

   If you have any questions about getting a loan pre-approval, give me a call, Clint Freeman at (760) 382-1082 and let's talk!!