First Time Home Buyer Pros is hosted by Dat Nguyen, a Certified Mortgage Advisor and mortgage loan officer in Orange County, California. Each week, Dat breaks down mortgages and the home-buying process so first-time buyers can make smarter decisions about financing, pre-approval, down payments, mortgage rates, offers, closing costs, underwriting, and buying their first home.
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Today we’ll be talking about what is a pre-approval or pre-qualification.
We’ll also talk about what kind of documentation you may need to get that letter.
Let’s start at the beginning, a pre-approval or pre-qualification are both letters that your loan officer will create that states how much of a loan you could be approved for. This letter is used while you are shopping for homes as well as when submitting offers on homes.
Email: hello@fthbpros.com or dat@elendingteam.com Instagram: @Datloans Everyday Lending Group NMLS 1379110
If you know someone thinking about buying their first home, send them this episode. The more you understand the process before you start, the easier it is to make confident decisions when the right home comes along.
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Philip:
Today, we'll be talking about what is a pre-approval or pre-qualification. We'll also talk about what kind of documentation you may need to get one. Welcome to the loan pros podcast, where we help make you a more informed home buyer. We're here to help you navigate the home buying process with an emphasis on the lending side. Let's talk about what is a pre-approval or pre-qualification letter. We'll also talk about the kind of documentation you may need to get that letter. Let's start at the beginning. A pre-approval or pre-qualification. Now they're both letters that your loan officer will create that states how much of a loan you could be approved for this letter is used while you're shopping for homes, as well as when submitting offers on homes, a pre-approval and a prequalification letter are actually quite different when it comes down to how strong they are. Let's start with a pre-approval. A preapproval letter is the stronger of the two because in order to get a preapproval letter, you have to actually apply for a loan. The application will ask for your employment information, your income, your debts, and your assets. Based on that information, the lender will pull your credit and do what's called a hard credit inquiry. This will temporarily lower your credit score by a few points, but it will give the lender a more accurate picture of your financial situation. Once the lender has all of that information, they will then determine how much of a loan you are approved for, and they will send you a pre-approval letter. Let's talk about a pre-qualification a prequalification letter is not as strong as a preapproval letter because you do not have to actually apply for a loan to get a prequalification letter, to get a prequalification letter. You simply provide the lender. With some information about your employment, income, debts, and assets. Based on that information, the lender will give you a letter stating how much of a loan you are qualified for. As you can imagine since the information hasn't been verified, the prequalification letter isn't as strong as a pre-approval. Now that we've gone over the difference between a pre-approval and a pre-qualification letter. Let's talk about what kinds of documentation you may need in order to get either of those letters. For a preapproval letter, you will need to provide the lender with your last two years of tax returns. Your last two months of bank statements and your most recent pay stubs, your social security number, your date of birth and official identification. And any other documents that show income debts, or other payments that you may be making or receiving like alimony or child support. For a prequalification letter, you will not need to provide the lender with any documentation. You will simply need to give the lender some information about your employment. Income. Uh, debts and assets. Now that you know, the difference between a pre-approval and pre-qualification letter and what kind of documentation you may need to get either one of those letters you're on your way to being a more informed home buyer. When are they used? The letters are used when your agent is making appointments for you to see homes. They're typically used to ensure that the people coming through, looking at the homes for sale are already qualified buyers. If you don't want to get a pre-approval or want to look at homes and are not in the market to purchase, going to open houses is the best option. COVID also had a bigger impact on these, in years past, it wasn't as much of a requirement to have a pre-approval to tour a home. As people are preferring to reduce the number of people in their home. This helps keep that number to just those who are in the market and could purchase the home. The second time these are used is when your agent is submitting an offer. They put together a packet, which will include this letter, helping ensure that your sellers know you have gone through the process, and a lender has stated that you have the funds and the means to purchase the home. And finally let's discuss how long this process can take. Most pre-approvals take a lender about an hour to input in the system and run the numbers. The more complicated your finances, the longer this process takes. Some items may need to be run by the processor or underwriting teams to ensure it is being calculated correctly. That can add an extra day or two to the overall time. If your finances are not complicated, you can expect a pre-approval the same or next day. If it takes any longer, this usually means your finances are either more complicated or your loan officer may just be busy and not able to dedicate enough time to your file. If you have any questions about the loan process, or if you're ready to get started shopping for homes, we can help just go ahead and reach out. I hope this has been helpful and makes you a more informed home buyer.
