Today's seller expects your financing to be approved prior to submitting an offer. Anything less will put you at a competitive disadvantage at contract time.

Pre-Qualified vs. Pre-Approved

Many people use these terms interchangeably, but they really mean two very different things.

Most lenders can pre-qualify you for a mortgage over the phone. Based on general questions about your income, debt, assets, and credit history, they can estimate how much mortgage you qualify for. They may even put this information in a letter to you.

However, a pre-qualified letter is not verified and often doesn't count for much if you are competing with other buyers who are pre-approved.

Pre-approval means that you have applied for a mortgage. In other words, you have filled out the mortgage application, received your credit report, and had your employment and assets verified. When you are pre-approved, you know EXACTLY what the maximum amount of your loan can be.

You need to be pre-approved for a loan in advance. The verifications will then have been completed before you even write a contract. All you have left to do is find the home you want and write an offer. If the seller accepts your offer and the home appraises for the amount required by the lender, you're all set.

A pre-approval letter provides you with the leverage you need to obtain the very best price and terms. You and the seller know exactly how much house you can afford. It gives you credibility as a prospective buyer who is very serious and ready to act. The seller knows immediately that you will be able to obtain a loan to buy their property.

Requirements for Pre-Approval

The following documents are usually required to issue a commitment or pre-approval letter:

• Written loan application
  
• Credit report reviewed by lender
• Verification of income
• Pay Stubs
• Tax Returns if self-employed
• Lender's Verification of Borrower's Assets and Liabilities
• Bank Statements