Pre-Qualified? What is it?

Have you ever heard the phrase, "Preparation is key?" Most people have. Whether it is planning for a presentation at work, learning a new skill in the sport you love, or achieving your yearly goals, preparation serves a monumental purpose in all of those. Buying a home also takes preparation and one piece of that is getting pre-qualified to buy a home. You can rely on your realtor, lender, and other resources to help you understand more about this process, but this article will provide the foundation for when you do need to get pre-qualified. Before diving into the timing of getting a pre-qualification letter, let's first address why pre-qualification letters matter. A pre-approval qualification letter is a document that your lender puts together to show how much they are willing to loan you for a home. The process first starts with reaching out to a lender who will review certain information including credit score, debt to income ration, savings balance, and your income. Each lender may have a slighly different process for applying or what documents they require to get pre-qualified, but it is a pivotal step to the home buying process. The pre-qualification letter typically lasts 3 months. If you have the timeline of moving into a home by the beginning of summer, it does not hurt to begin the pre-qualification process 3-6 months in advance. Why 6 months? It can allow you time to build your team with a trusted realtor and lender, while also understanding exactly what home you really are looking for. If the pre-qualification letter expires after 90 days, it often isn't a strenuous task to get re-qualified. Now, let's discuss what purpose this document serves. 

Pre-qualification letters can sometimes get skipped over when a buyer begins to shop for homes. Although it is not required, the pre-qualification letters provides benefits to not only the buyer, but also the agent who is assisting them and the lender. Why? It gives the buyer an idea of the price range they can afford and an estimate of the monthly payment. Not only does it provide an advantage in the beginning of the home buying stages, it also allows the lender to get ahead of the game for once you do get under contract with a property and the loan needs to be finalized. The pre-qualification letter allows a buyer to differentiate themselves among others when making an offer as well. For example, if there are 3 offers for a home and only 1 of them has a pre-qualification letter or proof of funds, that could help convinvce the seller that you have done the due dilligence to get approved and are a serious buyer. Winning an offer, especially in a seller's market like it currently is can be tough. A purchase agreement can have several different ways to stand out among others like the highest price, certain contigencies, etc. However, it should start with showing you are credible to the seller with a pre-qualification letter and that could be the one piece that allows you to purchase your dream home. 

Have any additional questions about pre-qualification letters? Let's chat and I can put you in contact with a trusted lender!