LOANS: Pre-Approval v. Pre-Qualification: What, How & When?

Getting a house loan

Let’s face it, it isn’t all that common that people can pay cash for a house.  This means they must get a loan, and that requires several factors.  Most people will jump into house hunting without knowing what to do or what to expect.  Let me start from the beginning with a couple definitions…

THE WHAT A lot of people get mixed up on whether they are pre-qualified for a loan or pre-approved, and maybe some people didn’t even know there was a difference.  Pre-qualification is the initial step you may take when first contacting a lender.  They will ask you questions and you will respond with your answers, simple.  This can even be done over the phone.  The lender’s response is what you will likely qualify for if you were to fully apply for a loan.  Pre-approval on the other hand is more in-depth digging.  In this process, the lender will require proof of what you have said by asking for several different documents.  Once the lender has everything he/she needs, then they will be able to fully approve you for your loan.

THE HOW Ready to figure out what type of loan you qualify for?  Let me take it back a step and let you know that the first step in the Home Buying Process is to find a REALTOR® to work in your best interests (if you’d like my Home Buying Process document, let me know-I am happy to share resources).  Once you’ve found yourself a real estate agent you’re comfortable with, ask them about lenders and for recommendations.  Usually agents will have several in their wheelhouse and can steer you in the right direction.  You’ll want to contact not one or two, but at least three different lenders to see who can get you the best loan terms-not every company/bank is the same.  You also want to find someone who you know will communicate well with you.  You pick your lender and then the process begins!  The lender and your real estate agent should guide you along the way.

THE WHEN Before you begin looking for a home, you’ll want to speak with lenders and find one who best suits you-as I stated above.  The key word in the previous sentence was “before“.  You do not want to jump into your home search without knowing what you qualify for.  You can assume you will be at a certain price range and be looking at things way over your real capability.  Once you move down to homes more in your price range, you may never be satisfied with what you see because you now have unrealistic expectations.  Another reason you should go to a lender before looking for homes, is so you are ready to jump on a house whenever you need to.  Usually people like to see a letter of pre-qualification or approval submitted with an offer (and sometimes they require it).  This shows the seller you are ready and have taken the necessary steps to go through with the transaction.  If you see a home you love and you don’t have a letter when some other buyer does…you may lose the house.

Hopefully this information has been beneficial and you can now relay it to your friends and family to help them out in the home buying process.  Let me know if you’re ready to take that step yourself, contact me by call or text at 502.320.7750 or by email at 🙂

Why Do It Alone?

real estate agent

When you break a bone, you go to the doctor.  When you have a cavity, you go to the dentist.  If you have a pipe that is leaking, you call a plumber.  You get my drift here?  So, when you need to buy or sell real estate, why wouldn’t you call a real estate agent?

There are many people that try to avoid working with a professional in real estate.  Some reasons to do so may be to avoid paying the agent, it may not guarantee you save money and the thought that you just might be able to do it all alone!  Here me out, I am all about saving money—but does that really need to be the deciding factor when going about one of the biggest transactions you’ll ever make?

Real estate agents are professionals in their field.  They went to school for what they do, invested a lot into their line of work (time, money, other sacrifices), had to pass exams (state and national) in order to obtain their license, complete continuing education requirements, and SO much more!  Trust me, they do not make it easy to get a real estate license.  Each licensee is unique and has put in a lot of hard work for what they do.

If you are thinking about buying a property and want to go about the search alone, you may not catch the things a real estate professional would.  Also, a real estate professional is not only there to assist you in finding a property, but they should be there every step of the way—like helping you with finding lenders to speak to to figure out what you can afford, the negotiation process, inspections, appraisals, understanding all of the paperwork involved and more.  It is especially important if you are interested in purchasing a “For Sale by Owner” property.  The seller may have a listing price of what they want out of the property without accurately analyzing the market and comparable properties.  If you did not have an agent looking out for your best interests, you could be overpaying for a property that may also have hidden issues.  Now back to the whole saving money ordeal, buyers typically do not pay the real estate agents commission.

If you are trying to sell a property on your own for one of the reasons I discussed earlier, read the last few sentences of the paragraph above.  People truly do have a fear of purchasing from the seller directly for those reasons.  Real estate agents are meant to be the middleman, providing full disclosure to all parties and providing you with an accurate market analysis to market your home in the right price range to attract buyers.  Different real estate agents or REALTORS® have various services they offer to their clients or customers.  That is why it is important to talk with multiple before deciding on one, that way you can see which one you get along with and will provide you and your home with the most resources.  Yes, the seller does typically pay the commission, but this should not be the reason you do not work with an agent.  If your home can be marketed to more people than you can do alone, you can try to avoid legal issues, actually understand the process and paperwork involved, your home sells faster than you expected, and maybe even for more money than you anticipated, I’d say it is well worth it to work with an agent.

The point is, do not totally discount using a real estate agent and the importance of doing so before doing some research and actually talking to a few of them first.  Just because you talk to some does not mean you have signed a contract.  It is OK to check around and see what all they have to offer. 🙂