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There are two common terms: "Pre-Qualified Buyer " and "Pre-Approved Buyer". These terms mean completely different things, and a first time home buyer needs to be at least "Pre-Qualified" before looking at any homes or property.
Professional Realtors will require you to be "pre-qualified" before scheduling appointments with you to look at any property listed for sale, or they are not honoring the listing commitment with the seller. Realtors are required to treat both buying and selling parties with respect and to honor their relationship with both parties.
Being "Pre-qualified" means that you meet the basic financial criteria necessary to buy a house in a given price range (before you waste your time and the Realtor's time looking at houses you are not "qualified" to purchase.) Pre-Qualification: A reasonable estimate of homes within a buyer's price range. Pre-qualification generally involves talking with a bank or lender (either via a phone call or by meeting with the lender in person.) The lender will need you to provide information about your assets, debts, and the amount and source of money you have available for a down payment. The lender work with you to determine an estimate of the home price you could qualify to consider for purchase. Lenders usually perform this service for free. Lenders hope that you will come back to them when you are ready to apply for a loan and borrow money. Most Realtors will ask about your pre-qualification prose and usually want to review the information before proceeding with shopping for a home. After working through the pre-qualification process, you are not obligated to do any further business with the pre-qualification lender and they are not obligated to actually loan you any money. Pre-Approval: Getting pre-approved means that you have established a tentative commitment from a specific bank or lender. Pre-Approval is a more formal relationship with a lender for obtaining a mortgage and you are ready to go when the time arises. You usually provide a home loan lender with documentation of your income, assets, and debts. The lender sets you up in their system as a pre-approved borrower. Most lenders charge a loan application fee and the lender obtains a credit check from one of the credit rating agencies. Usually the lender will verify present employment and wage information. If you are approved, the lender will give you a letter of commitment, stating how much money they are willing to loan you for a home mortgage. This is necessary to actively start shopping and touring homes listed for sale. Realtors and home sellers will take you seriously once they see you have your mortgage funding in place. A pre-approval is not a guarantee that you will be approved for a mortgage loan. The loan approval won't be finalized until the lender has gotten an appropriate property appraisal, obtained a title search, and other verifications are all correct for the specific house you have chosen to buy. You are not under any contract requiring that you use this lender, although you will find it faster and easier to actually buy a house if you are working the lender having given you a pre-approval letter. If you do stick with the same lender that pre-approved you though, the application process ...it will be usually speed the closing process significantly ...plus you won't have to start over with a new lender and pay loan application fees a second time.
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