Cindy Mullen, mortgage consultant at Univest Bank (215-919-8038) was very helpful in defining what happens in the second step toward home ownership. Simply put, potential buyers need to speak with a knowledgeable mortgage professional. Cindy said the objective is for "the buyers to be either be pre-qualified or pre-approved for a loan" and "there is a big difference between the two."
The pre-qualification process is more top line. Information such as income, credit history etc. can be given verbally as well as written and there may be a credit report run. The pre-qualification process estimates the loan amount the buyer could qualify for and gives the buyer a good idea about how much house they can afford. A pre-qualification letter enables a buyer to start searching for a homes in an price range that's affordable for them and lets a seller know there is potential for this buyer to get a mortgage and to reach settlement.
As per Cindy, the pre-approval process is much more "formal". The information collected is more in-depth; the buyer will be asked for documentation including tax returns, pay stubs and bank statement among others. A credit report is run and frequently the file is reviewed by an underwriter. A pre-approval strengthens the Buyer's position when negotiating an offer and it confirms that the buyer has the needed funds to purchase a home and get to settlement.
Once armed with a pre-approval or a pre qualification letter the Buyer (with help from a knowledgeable Realtor) is ready to begin looking for the perfect home!
P.S.
I encourage potential buyers to speak with their Realtor for guidance, go to their bank or a direct lender rather than use the internet for pre-qualification.
Margot Aronson is a full time REALTOR at RE/MAX 440 in Skippack 610-306-7939 (cell) 610-584-1160 (office) www.margotaronson.com
