There are many reasons to be pre-qualified or pre-approved, let us focus on the most important ones.

First being Pre-qualified or Pre-Approved for a specific loan amount helps you to set your expectations and limits when selecting the homes to consider. You may qualify for more than you thought you would and wanted to spend.

Being Pre-Qualified or Pre-Approved will be used as a strong point when submitting a contract offer. Pre-Approved status offers a better negotiation point, but a contract offer that has a documented pre-qualified or pre-approved letter will be much stronger than a contract where there is no verification of funds included. The letter from the lender puts the seller's mind at ease that the contract will not fall apart at the last minute due to financial issues associated with the purchaser's poor credit or buying power.

Most home sellers will not even consider any contract offers where there is not some type of lender's letter indicating a pre-qualified or pre-/approved status or a statement showing verification of funds to purchase (bank statement for cash purchases).

Begin by talking to a lender first. They will tell you about all of the loan options available and the documentation and information that is required for the pre-qualification letter to be issued on your behalf.

By talking to the lender first, it allows time to correct minor credit issues or discrepancies. After you provide your basic information and written permission to check the credit to the lender, they will run a credit check on you and your spouse or co-buyer, if applicable. If something should show up on your report that you did not expect, it allows you to contact that creditor and resolve or dispute the issue to render your report accurate. Then you can plan and correct those problems prior to proceeding so they won't affect your loan amount.

Note: even with less than perfect credit, you may still still be approved. However, there is ultimately a cost to having damaged credit. This cost is reflected in the lender requiring a higher down payment, loans with higher interest rates, having to pay mortgage insurance and possibly different terms and/or higher closing costs associated with the loan.

For complete and accurate information, you can be put in touch with a mortgage specialist today.

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