In order to make an offer on any homes for sale in Irvine that sellers will take seriously, it is important to start the funding process as early as possible. Once you’ve received a loan approval from a reputable lending institution, you’ll find that sellers are more than willing to work with you. The very first step in this process is understanding the difference between pre-qualification and pre-approval. Although these terms sound the quite the same, they actually have vastly different meanings.
What is Pre-Qualification
Pre-qualification is nothing more than a general estimate of the amount you may be qualified to borrow based upon your current debt to income ratio. You can pre-qualify with a lender over the phone or online given that the process does not require the submission or verification of personal documents. Pre-qualification can be used as part of your efforts to build a feasible budget for this purchase by giving you a basic idea of how much lenders might extend if you fare well in an actual loan application review. Pre-qualification is by no means a guarantee of funding and it does not carry any weight when making offers on Irvine houses for sale. Many buyers who have been pre-qualified for loans discover that they are not approved for financing once exhaustive reviews of their finances and credit histories have been performed.
How to Get Pre-Approved for a Loan
The pre-approval process is far more time consuming. You can apply for a loan pre-approval once you have identified a mortgage lender that has funding products that are suited to your short and long-term purchasing goals. You can work with a private mortgage advisor or a mortgage broker to learn more about the lending institutions and loan products that are accessible to you.
Once you have identified the right lender, you will need to submit a comprehensive loan application packet that includes one to two months’ worth of pay stubs, verification of your current assets, your tax returns for the past two years, profit and loss statements for any businesses that you own, canceled checks for rent or mortgage payments, and a complete list of all of your debts among other things. After your credit score has been pulled and your file reviewed, the bank will decide whether or not to extend funding. If approved, you will receive a pre-approval certificate that you can share with sellers as proof of your ability to back any offers that you make. This certificate will also specify the loan amount that the bank has pre-approved you for.
Guarantee of Funding
Many people are surprised to discover, however, that even a loan pre-approval is not an absolute guarantee of funding. Pre-approval carries far more weight than pre-qualification, but there are still issues that could derail the funding process even after a pre-approval has been granted. For instance, searches through public records could reveal liens against the borrower that cause the lender to have a change of heart. Some buyers even make the mistake of taking on new debts after having received pre-approvals, which can lower the amount of money that banks are willing to extend. Thus, there is no absolute guarantee of funding until the loan application has been pre-approved and is in the hands of the loan underwriter for final processing.
When you’re ready to get serious with your home search, Irvine Residential Living is here to guide you through the home-buying process. Our experienced Irvine real estate agents can help you understand each step, ensure all documents are correct and transmitted in a timely manner, and, most importantly, help you find the home of your dreams! Give us a call at (714) 454-6304 and schedule an appointment today.