Should I get Pre-Approved for a Mortgage?
So, pre-qualified, pre-approved, closing costs. What does all that mean for you? Stay tuned. I'll tell you.
Hey everybody. Jon Sump here once again with the Home Brokerage. We're always putting your home first. So a lot of people don't understand the differences between pre-qualified or pre-approved. It's a huge difference. So what it actually means is, that depending on which lender is doing the job there's a lot of variation. As a buyer and seller it's always best for a buyer to be pre-approved, from a sellers perspective.
The pre-qualification just means that in some cases ... Let me give you worst-case scenarios. In some cases all they did was meet with a lender, tell their lender their financial status and the lender says, "Okay, well if you give me documents to back that up we can move forward but by the way, here's a letter saying you're pre-qualified." Some lenders do a little bit more. They get the papers in but they don't crunch the numbers.
So it just depends but pre-approval means they've gotten all their documentation. The lender has crunched all the numbers. The send it to their underwriters to approve it and they've come back and said, "Yes. This is a person we're going to do a loan on." From a sellers perspective, that's golden. That means it's not going to take half as long to do the deal. You're not going to have to wait for a buyer to get this form or that form halfway through the deal or at the end of the deal.
So you definitely want to make sure, as much as possible, depending on the lender, that the people are pre-approved. Or if it's a reliable lender that you know of, reputable company, some pre-qualifications are okay. The lender that I use is golden. Whenever he says they're pre-qualified, they good to deal. There's no if, ands or buts.He almost gives me an approval but he can't quite give me that without the rest of the company backing it up.
But never have a dealt, done a deal with him where he says they're pre-qualified and in the end, they weren't. So it depends on your lender. If you need a good lender let me know. The other thing is, closing costs. Well for buyers, this is the big deal because a lot of buyers don't realize that in addition to saving that money for a down payment, you have to save the money and set it aside for closing costs.
What are closing costs? Well that's the cost the title company's going to need. That's the cost that the lender is going to charge. Appraisal, all those types of fees go into there and it can be anywhere from three percent to five percent depending on the loan value. So keep that in mind when you're saving up to buy your next home. You want to set aside at least three to five percent, somewhere in there for loan ... I'm sorry, for closing costs on top of the down payment amount.
So, two things. Make sure you got your closing costs and your down payment money for buyers. For buyers and sellers ... From a buyer's perspective, just so you know, in regards to the pre-qualified or pre-approved, from the buyers standpoint it's also golden from a negotiating standpoint. It shows, "Look. I'm serious. It took the time to get pre-approved, not just pre-qualified."
So I hope this was helpful. If you have any questions regarding pre-approval, pre-qualification or your closing costs feel free to give me a call. If you need a lender, got one that is the bomb. Thanks again. Have a great day. Bye-bye.