The difference between pre-qualification and pre-approval
The importance of a pre-approval
Working as a downtown Boston condo buyer’s agent, 8 out of 10 times I receive inquiries from buyer clients who want to see Boston Midtown condos without already having a mortgage pre-approval. A pre-approval letter should be the first step in your home search. Searching for downtown Boston condos prior to pre-approval is a waste of your time. There are many factors and preparation that can affect your pre-approval and rates, including repairing your credit score, amount of down payment, closing costs, reducing debts. You need to first talk to a lender. When a Boston downtown condos buyer cannot qualify for a mortgage, there is no point looking at Boston Beacon Hill condos with a real estate agent.
Submitting an Offer
All Boston downtown condo Offers should be submitted with a pre-approval letter so the seller feels comfortable about accepting an offer from someone who can actually obtain financing. Getting pre-approved also takes a few days so it makes no sense to find your dream Boston Seaport condo without already having it ready to submit with your offer. In today’s Boston condo market you’ll find that Boston condos for sale in the median price range get snatched up so quickly if they are move-in ready and priced reasonably. It’s important for future buyers to do their homework first with a mortgage situation before emotionally investing in their future of finding your dream Boston condo for sale.
Sellers want to see a solid pre-approval letter, not a pre-qualification letter. Sellers are represented by listing agents and the agents know what is a good pre-approval letter and what isn’t. Often times, buyers mistakenly believe that a pre-approval letter is the same as a pre-qualification letter. Some lenders actually use the word “pre-approval” when it actually is a pre-qualification. So what’s the difference
What is a Pre-Qualification Letter?
Pre-qualification is a piece of letter from a lender saying that the buyer is pre-qualified for a mortgage based on the income information he or she verbally communicated to the lender. Anyone could tell the lender that he or she makes a million-dollar salary and will receive a pre-qualification letter. It basically means nothing and no prudent seller will rely on pre-qualification letters.
Pre-approval is when a lender actually approves of one’s ability to obtain financing up to a certain amount after verifying income documents and pulling the borrower’s credit. The lender analyzes the borrower’s debt to income ratio against the monthly mortgage and interest payments and determines the borrower’s true financial ability for mortgage approval. This is the type of approval that is needed in today’s market for an offer to be considered seriously.
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