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How to Avoid a Messy Mortgage: Get Pre-Approved

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Pre-Qualification vs Pre-Approval: What’s the Difference 

Imagine you’ve been shopping for the perfect home for months and the one you love finally pops up. You click the little button that says schedule a showing and off you go. When you get to the home it’s just as amazing in person as it was online. You tell the realtor you’d like to make an offer and they ask if you’ve been pre-approved. 

You were ready for this question because while you’ve been shopping for a home you had been seeing ads to get “pre-qualified” by a company that promised you an instant pre-approval letter.  In your mind, you are ready to go because you have a pre-approval letter. 

What super-fast instant approval mortgage company didn’t tell you is that there is more that goes into getting approved for a loan than a credit pull and an application.  As the consumer you enter in your information as best you can, and the machine spits out a letter. Magic!

However, what if you had been laid off due to COVID 19 for 3 months, maybe you are self-employed or work on commission. Maybe you are a little short coming up with your down payment and closing costs. 

Any of these things could cost you an approval on the home you love, leaving you frustrated and maybe a little embarrassed.  

That is where the difference in being pre-qualified vs being pre-approved lies. 

What is a pre-qualification? 

A pre-qualification is an approval based solely on verbal or written information provided by you and a credit report.  The benefit of a pre-qualification is you can get an answer quickly. The downside of getting an answer quickly is that it’s not very thorough.

Your loan application and your credit report will give us great insight into your ability to repay your loan but it will not give a complete picture of it. There could be hidden pitfalls that will not surface until we begin to verify your application. 

What is a pre-approval? 

A pre-approval like a pre-qualification starts with an application and credit pull, but it should move further to include the collection of important supporting documents. 

The typical documents lenders require are: 

  • Most Current 30 Days of Paystubs
  • Last Two Years of W2’s 
  • Last Sixty  Days of Bank Statements 
  • Last Two Years of Tax Returns 
  • Driver’s License

These documents should support the information you put on your loan application. A quality loan officer will be able to review these documents and provide you with a pre-approval that you can trust. 

After reviewing these documents, you could be asked to provide additional information. 

Here are some common additional documents that will be requested after reviewing your initial documents: 

If you are tempted to be frustrated by the process of collecting all of this personal information from you, we certainly understand. 

  • Child Support/Alimony/Divorcee Documents 
  • A letter explaining different addresses 
  • A letter explaining any recent credit inquiries
  • Explanation of any large deposits into your bank account that’s not payroll

Why are these documents so important? 

Collecting this information is vitally important because a good loan officer is going to want to catch any potential issues upfront BEFORE you go under contract. It’s one of the reasons why getting pre-approved before shopping for homes is so important. 

If issues arise and they do with borrowers of all income and credit backgrounds, we want to catch that before it turns into a huge mess. 

Imagine getting prequalified for a $300k home but after reviewing all your documents, you can only afford a $200k home.  

The good news is that we can make the process fairly simple in collecting this information and now that you know about it you can begin to collect this information. 

If you’re working with a lender who uses technology (like us) you can send this information quickly in a secure online portal. 

Even better we can digitally verify your bank statements with a secure online login as simple as signing into your account. We can even verify your employment with certain employers instantly and provide you with the letter you need to buy that perfect home. 

At Bayou Mortgage we live by the philosophy that an ounce of “prevention is worth a pound of cure”.  While it may take a little more work upfront, you can rest assured when you work with us we will be thorough and you can trust our pre-approval letter. 

If you are shopping for a home and you haven’t been pre-approved or you want a second opinion we are ready to help! Just click one of the many get qualified buttons to get started.  

About The Author

Channing Moore

Channing is the owner of Bayou Mortgage. He is passionate about empowering people through education and training to own a home. In his spare time you can catch him at church, reading a book or working on his latest project.

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