Loan Pre-Approval Process

Ah yes… the pre-approval process. Before a buyer begins his/her search for a home, the process of getting pre-approved is the first important step. Wait… You have heard of this but are not sure what it means? Well, good thing for you, we have the answer right here! Let’s take a close look at this process, define what it is and explain how it can make your break your home search. According to Freddie Mac, a pre-approval can be explained as follows: “A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy a home… Keep in mind the loan amount is the lender’s maximum offer. Ultimately, you should only borrow the amount you are comfortable with”. Well said for sure (And that last piece is of great importance. Just because you are pre-approved for a certain amount does not mean you should pay said amount for a home). So, now you have the definition, what is the process? Getting pre-approved involves speaking with a mortgage originator, submitting pay stubs, W-2’s, tax returns and other various documents that show your income, expenses, and ultimately your net worth. From here, the mortgage pro will give you a letter detailing the amount discussed above and any conditions attached for the loan to go through (such as the need for an appraisal, final employment check, etc). This pre-approval is memorialized typically in a letter, and said letter can be used when submitting an offer on a home to a listing agent and seller. In fact, it is usually required when making the offer. Why is a pre-approval so important? Because it gives you street cred! It ensures the listing agent/seller know you can likely afford the home you are choosing. With inventory being so low, and a seller’s market still in full steam, making sure everyone understands what you can afford is imperative. And if for nothing else, you need to be competitive. Having a well written pre-approval letter puts you in a great position to be selected as the winning bid. As Greg McBride, Chief Financial Analyst at BankRate explains: “Pre-approvals carry more weight because it means a lender has actually done more than just a cursory review of your credit and finances. They have reviewed your pay stubs, tax returns and bank statements. A pre-approval means you have cleared the hurdles necessary to get a mortgage”. So, what’s the bottom line? Sellers love a strong pre-approval letter. They want some security said buyers can follow through with the sale. The pre-approval also represents the first step in building that all important trust in the processes. After all, anyone would want to know whomever is asking to buy our home can afford it, right? Ok folks, that is all for now. As always, speak with a local Realtor and mortgage originator to determine if buying or selling a home right now is the best decision for you and your family. Good luck, stay safe and be kind! #preapproval #homebuying #realestate

PRE-QUALIFICATION vs PRE-APPROVAL -real estate talk 💰- When you're thinking of buying a property, you’ll often hear the terms pre-qualification and pre-approval. While both are part of the mortgage process, they serve different purposes and offer distinct benefits. Understanding the difference can help you better prepare for purchasing a home. 💰What is pre-qualification? Pre-qualification is the first step in assessing whether you might qualify for a loan. It's typically a quick process where you provide basic financial information, such as your income, expenses, and debts, to a lender. Key features of pre-qualification: Informal and non-binding: The lender gives you an estimate of how much you can borrow based on your stated finances. No credit check required: This step usually doesn’t involve pulling your credit report, making it a no-risk way to explore your options. Best for planning: Pre-qualification helps you understand your potential buying power before actively shopping for a property. Example: If you earn K70,000 annually and have limited debt, a lender might estimate that you qualify for a loan of K300,000. 💰What is pre-approval? Pre-approval is a more detailed process and the next step after pre-qualification. It involves a thorough review of your finances, including pulling your credit report, verifying your income, and analyzing your expenses. Key features of pre-approval: Formal and binding for a time: A pre-approval comes with a conditional commitment from the lender, stating how much they are willing to lend and under what terms. Requires documentation: You'll need to submit proof of income, tax returns, bank statements, and other financial records. Stronger bargaining power: Sellers view buyers with pre-approval as serious and capable of closing a deal. Example: After reviewing your documentation and credit score, the lender might offer pre-approval for a loan of K280,000 with specific interest rates and repayment terms. How are they different? Which one should you prioritize? While pre-qualification is a great starting point, pre-approval is essential if you’re serious about purchasing a property. It not only gives you a clear understanding of your budget but also demonstrates to sellers and agents that you are a committed buyer. Tip: Start with pre-qualification to explore your options, but move to pre-approval once you’re ready to make an offer. Conclusion Both pre-qualification and pre-approval are important steps in the homebuying process, but they serve different purposes. Pre-qualification helps you prepare and understand your finances, while pre-approval strengthens your position as a serious buyer. By knowing the difference, you can navigate your homebuying journey with confidence and clarity. PLEASE SHARE IT 🙏🏾

Before you make any offers, cash or financed, make sure your financing strategy is locked in. Here’s what you should do: ✅ Get Pre-Approved Early – Don’t wait until you find the property. Having your documents ready and your pre-approval done gives you leverage. ✅ Be Clear on Your Income Situation – Lenders need proof of stable income. If you’re switching jobs, selling a business, or changing careers, plan ahead to avoid surprises. ✅ Align Your Offer With Your Financing – If you plan to use a mortgage, don’t structure your offer like it’s cash. It can cause delays and even cost you the deal. ✅ Work Closely With Your Lender – Be transparent about your situation so they can help you structure a strategy that actually works. 💡 Bottom line: Preparation beats panic every time. Know your numbers, get your documents in order, and make offers you can confidently close on.