In the past, homebuyers could visit a lender, answer a few questions, and get a rough idea about what they would qualify for in a home loan. That was enough to start their home search. However, nowadays, buyers need to include a pre-approval letter with their offer. And in a seller’s market like Lake Havasu’s, you may only have a few days to find a property and put in an offer before someone else snatches it up. Therefore, we at the Sunstone Real Estate Group highly recommend that you make an appointment with your lender before you start looking for your new Havasu home.
Why Loan Pre-Approval is Important to Your Havasu Home Search
Pre-Qualification vs Pre-Approval
It might help you understand why pre-approval is preferred over pre-qualification if you know the difference between the two. Pre-qualification takes just a few minutes. The lender asks you about your income, employment, and if you have any assets among other things. Then, they may perform a “soft credit check” to see where your FICO score sits. Based on this information, the lender provides you with a conditional limit to what you might qualify for in a mortgage loan. This process takes just a few minutes.
For a loan pre-approval, the lender needs to see a valid ID, bank statements, W-2’s and/or 1099’s, paycheck stubs, and proof of assets among other things. Then, they run a full credit check and verify that the information you provided is valid. Basically, pre-approval brings you all the way up to underwriting with your mortgage loan. The pre-approval process takes a much longer time to complete. That is why you need to start it right away.
Why Is It Important to Get Pre-Approved First?
Like I said before, sellers want to see a pre-approval letter included with an offer. In fact, if they do not see one, they may set your offer aside and go to someone else, even if that offer comes in lower. Why? Because the seller runs the risk of you not qualifying for a loan and then walking away from the sale. In turn, they then need to put the property back on the market and look for a whole new buyer. Also, completing the pre-approval process early shortens the escrow process by at least a week. That gets you to the finish line faster. Sellers appreciate that as well.
Where Do I Start?
First, I highly suggest that you request a copy of your credit report from TransUnion, Equifax, and Experian. You are legally allowed one copy of each report every 12 months for free at AnnualCreditReport.com. Check each report for errors. If you find them, report them immediately and request corrections. You must provide proof of the error when you report it as well. Creditors do not necessarily report to all three agencies. Therefore, your scores may vary from agency to agency. Lenders take the median number and use that to help determine your creditworthiness as well as interest rate. So make sure that your reports are as accurate as possible before starting the loan pre-approval process.
Each lender offers different programs and terms. Therefore, you need to contact several different lenders to find one that fits your needs. A good place to start is with your local bank. But do not make that your only stop. Credit unions and even some online lenders may actually offer you better rates than your current bank. NerdWallet provides a list of who they consider to be the Best Mortgage Lenders right now.
When you are ready to start looking for your next Lake Havasu home, contact the Sunstone Real Estate Group.