Why Is It Important to Get Pre-Qualified
Prior to viewing properties with a Realtor, it is important that you provide a current pre-qualification letter stating the loan amount that you can afford. If you’re serious about buying a home, get pre-qualified before you start viewing homes.
When you pre-qualify for a mortgage, the lender calculates the approximate amount you would be able to borrow, based on your current income and debt. Since you do not complete a mortgage application or provide financial details, pre-qualification is not a guarantee. It simply helps you determine how much you should plan to spend on a home. Before you are approved for a mortgage, you will have to go through the mortgage application process, including a credit check, and provide financial documentation.
You may not qualify for a mortgage loan. Often a buyer doesn’t know that they don’t qualify or that they have to wait to clear up some credit issues. Pre-qualification can save you a lot of wasted time.
You will know approximately how much you will be able to borrow. Why waste your time looking at houses priced at $200k when you can only afford $125k. Knowing what price range you can afford will make a huge difference and save you some serious heart-ache.
You can place an offer on a home that you love! In today’s real estate market, you will need to provide a pre-qualification letter if you are to obtain financing when you place an offer on a house. A Seller will not consider your offer until they have proof that you can qualify for a loan. If you fall in love with a house, then have to wait a day or so for your pre-qualification letter, another Buyer may make an offer and you may lose your opportunity to purchase the home of your dreams.
Don’t waste your time, your Realtors time and any other parties involved. Your Realtor works for free and only gets paid when a deal goes to closing. Say you want to view some homes. Your Realtor looks each one up on the MLS system, has to contact each Listing Agent to check availability and for showing information and then has to map out each property and coordinate the times for the showing. Your Realtor prints out each Listing and may even create a spreadsheet for you. Your Realtor uses their time, gas, mileage, and supplies to show you these properties. Imagine what it will be like, if after all that work, you find out that you can’t qualify. That wouldn’t be fair to you or your Realtor. View several houses and understand why your Realtor is asking to see your pre-qualification letter before scheduling your viewings.
What is the Difference Between Pre-Qualification and Pre-Approval?
Pre-qualification is an unofficial estimate of how much house you can afford. A loan officer will make an educated guess about your ability to buy a home based on your verbal or written submissions of income, finances, and credit history. Lenders will not generally pull your credit report during this evaluation.
Pre-approval carries a lot of weight in the mortgage and real estate industry. In order to be pre-approved for a loan, you must provide your preferred mortgage lender with documents such as tax returns, bank statements, business licenses and many others. The Lender will analyze these documents as well as other information gained by calling your employer and pulling your credit report. They will then produce a pre-approval letter which certifies that you have the necessary resourcesto buy a home for a certain amount. The pre-approval letter will also usually specify the interest rateyou will pay for borrowing such a sum. Sellers love buyers who are pre-approved because they haveproof that the buyers have financial backing and are prepared to pay the required amount. In real estate hot spots, some sellers won’t even consider offers from buyers without pre-approval letters.
What is Homeowners Insurance?
Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.
Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance.
You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners’ responsibility.