The lender will ask for details about the borrower's income, employment history, debts, credit, and assets. This will help the lending agency to determine how much of a mortgage the buyer can afford, and it can also give the buyer an idea of how much their monthly payment will be depending on the amount they borrow. Since the information is not verified at this stage it is non-binding, but it does provide some information to sellers about the state of they buyer's finances and credit. Generally the prequalification process can be completed within a number of minutes.
Preapprovals are even more beneficial than being prequalified which is a subject we will cover in an upcoming article. In a preapproval, the lending agency verifies the buyer's information by contacting their employer, checking their credit history, and contacting their bank. At the end of the process the buyer will receive a preapproval letter that indicates how much mortgage they were approved for and the specific time frame. That will come in handy when putting an offer in on a home.
Get An Edge
Getting preapproved for a loan will give the buyer an edge while looking for the perfect home. By knowing how much they will be able to borrow, the buyer can spend their time looking at homes in their price range. By weeding out the houses that they can not afford, the buyer will be able to take a more detailed look at the houses that they are realistically able to purchase.Preapprovals also give sellers confidence during the negotiating phase that can give buyers who have them an edge on the competition. Sellers will be more likely to immediately accept an offer, even for a price that is less than the listed price, when the buyer can provide a preapproval letter. The seller will not have to worry about taking their house off the market only to have the buyer's financing falling through if they accept the offer. The seller may also appreciate the faster closing period that results due to having a preapproval, as the lender is able to expedite the process.
