Are you pre-qualified for a loan?
BEFORE you begin shopping for a new home, you should talk with someone so you can determine how much of a loan you can afford. This will put you in a better position as a buyer when negotiating a contract. It is important to understand the distinction of what being pre-qualified, pre-approved, and a conditional loan approval means. In the past there have been different terms used with varying meanings. There are primarily 3 different options available to you, and not all companies do all of these options. Check out the Home Page Button entitled "Mortgage Broker vs. Banker" for further information.
PRE-QUALIFICATION: (There are TWO different types!)
#1 - We collect your verbal information about your debt, income, and assets. We may access your credit report profile and assess assets for a down payment and give you an idea of the different loan programs that would work for you. You do not need to give any documentation to verify the income and assets. We issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow. This is a quick assessment of what you may qualify for, but by no means does it assure you of any hint of whether you could be approved for a loan. The last thing you want to do is go through all the searching for a home, writing of a contract, paying for escrow deposits, inspections and appraisals, only to find there are problems once we review your actual documentation of income (pay stubs & tax returns) and asset information. It is telling your Realtor "My best guess is they may qualify for a loan". Make sure you ask for a copy of your credit report - yes, it's legal to give you a copy.
#2 - You provide us with complete copies of your actual documentation such as pay stubs, tax returns (personal and business), W-2's, 1099's, assets, bank statements, and any other documentation we may ask for, depending on your financial situation. We’ll analyze your documentation, access your credit profile, research loan program guidelines and various lender's interest rates, and submit your application to an electronic Desktop Underwriting system for a preliminary Approved/Eligible determination. Once this is complete you will receive a pre-qualification letter indicating the amount and type of loan you have been pre-qualified to purchase, confirm you have submitted all of your documentation and we have a Desktop Underwriting decision. Again, this is not a commitment for a mortgage loan. Make sure you receive a copy of your Desktop Underwriting determination, and a copy of your credit. Anyone acting as a Broker must legally still call this a PRE-QUALIFICATION. Thus, it is very important to read the body of the letter to verify these steps have been taken. Brokers DO have the ability to send your file to the lender for a "To Be Determined" property, and once underwritten, they can then the Broker can legally issue a Pre-Approval letter and even a Conditional Loan Approval.
PRE-APPROVAL (Only lenders who underwriter and loan their own money can issue a Pre-Approval)
CONDITIONAL LOAN APPROVAL:
This is where we take the pre-qualification or pre-approval to the next level. We send your signed loan application, disclosures, and documentation to the pre-determined lender, based on guidelines and rates, with a "To Be Determined" address of a property in the future. The lender underwrites your file and sends us a Conditional Loan Approval. The conditional loan approval essentially means that you have met their underwriting guidelines for income, assets and liabilities. They still need a contract for the property to review and clear the final conditions, which requires an appraisal, insurance, and title work, etc. to move forward with a final approval and clear to close. This provides you with very stronger negotiating power over other buyers when involved with multiple offers received by the seller, at the same time. In today's market, you need as much help as you can get. Approximately 50% of the purchases in the Sarasota Florida area are cash offers! Cash to the seller means "done deal" and you will have a hard time competing with that.
As always, please feel free to call, text, or email me with any questions you may have: 941-504-1445, Sherry@SherryBitner.com