There seems to misconceptions about Pre-approvals. Are they necessary? How much will they cost me? Pre-approvals are an essential first step in the home buying process where borrowers provide proof of their income and assets, such as bank account statements, W2s, and pay stubs to a Loan Officer. Loan Officers then issue a pre-approval letter that will let buyers know how much house they can afford. Pre-approvals take in account any additional closing and settlement costs, down payments, and potential out of pocket expenses so borrowers know how much the loan will cost them at the closing table as well as each subsequent month. While numerous online calculators give a general idea of how much a buyer can afford, they can never take the place of an actual Loan Officer that understands the underwriting process and how those assumptions and calculations can be used during the loan process. There is no cost to the borrower to get a pre-approval.
Time is of the essence for most Real Estate agents and sellers. Many of them require buyers to produce pre-approval letters before showing them a home. They do not want to spend their time and efforts on someone who cannot afford to buy their listing. Buyers feels the same way when setting up showings and driving around to various Open Houses on the weekends. Pre-approvals make sure both parties are on the same wavelength. The pre-approval process can save borrowers valuable time, frustration, as well as some gas money! Pre-approvals are a win/win for everyone involved.
Some Real Estate professionals might ask for next step up from a pre-approval, called a TBD (Property To Be Determined). Lord Mortgage is able to provide a TBD which is a fully underwritten loan. If borrowers want this level of buying power, they need to go through the underwriting process which is a more in-depth income and asset verification. When Real Estate and sellers consider numerous offers on their listing, the fact someone has already received a pre-approval or TBD will definitely factor into their decision. Remember, there is no-cost to get a pre-approval and it can actually end up paying dividends for time invested at the beginning of the home buying process.
