“To be prepared is half the victory” ~ Miguel Cervantes
These are important words to keep in mind if you are considering buying a home in Austin in the coming months. Home inventory and number of days a home remains on the market are at historic lows, creating a competitive environment. Many prospective buyers may start the home search with their pre-qualification letter in hand under the mistaken belief they are ready to start making offers. What they need to consider when searching within a seller’s market (like Austin’s is right now) is the difference between the pre-qualification letter and a pre-approval.
Mortgage lenders will usually issue a pre-qualification letter based on preliminary financial information you’ve provided such as income, debts and other assets, to help you establish a mortgage amount for which you would most like qualify. This can be done over the phone or internet, is usually free and does not require review of your credit report. Lenders may take this opportunity to discuss various mortgage options with you at this time as well. So, while you’ve taken an initial step into home financing world, you are not yet a “sure thing” to a potential seller who may be considering multiple offers, some of which may be from buyers who have taken that next step, obtaining the Pre-Approval.
In simplest terms, a pre-approval shows that you have gone through the mortgage approval process and are ready to buy. Your credit report and credit score have been reviewed . Incomes and assets verified. An extensive look at your financial history has been taken. Your lender will nail down an interest rate and give you a specific amount for which you’ve been approved. When that seller sits down to consider those multiple offers YOU are now the “sure thing”.
Getting a pre-approval takes a little more time and will most likely involve an application fee but if you’re serious about buying a home it will put you in the best position to assure your home buying victory.