When shopping for a home, it is very important to do two things prior to beginning your home search. The first is to understand what amount you are capable of paying each month for your new mortgage payment (that could include taxes, insurance and mortgage insurance). The second is to speak with a loan officer to become pre-approved for a mortgage. This is important for two reasons. We want the seller and the listing agent to take our offer seriously when you find the perfect home and after everything is said and done, you are the one who is responsible for making the payment each month to the mortgage company so it important you feel comfortable with the monthly mortgage expense in order to purchase your home.
There are two types of mortgage approvals. A pre-qualification and a pre-approval are viewed differently in the seller’s eyes.
Pre-Qualification is establishes how much you can borrow only. It is not an assurance of mortgage approval. With a pre-qualification, the loan officer verbally as has verified your income and assets. At this time, they would have obtained a credit report. Until the information provided verbally is verified, the approval is only considered qualification.
Pre-Approved provides for increased bargaining power. With a pre-approval, the borrower has verbally provided all financial details, a credit report has been obtained, credit has been analyzed and all formal documentation has been delivered to back your verbal statements, which the loan officer has verified the information is sufficient to continue with an approval.
Conditional Approval is a firm decision to lend after fully vetting credit, income and assets based upon a full underwriting review. The only missing caveat in a conditional approval is the review of the appraisal. Conditionally Approved buyers have the ability to compete with the strongest buyers – cash buyers as the buyer has the ability to waive mortgage lending contingencies as they have already happened. This type of approval gives you the best bargaining power.