Welcome!  •  December 16, 2017  •  10:31 PM EST
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2b. Buying Power

December 16, 2017 - 10:31 PM EST

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2b. Buying Power

Properties in good condition and all the best deals sell quickly, so it's important to have your funds ready to go. Mortgage lenders will help you prepare for shopping by either pre-qualifying or pre-approving you. Either one will validate your estimates of how much you can afford, but only one will give you Buying Power.

Pre-Qualification

Loan pre-qualification simply indicates that you appear to be creditworthy enough to obtain a loan. It lets you know how much the lender might be willing to lend you based on your income and debts. Being pre-qualified for a certain loan amount doesn't guarantee you the loan. Often, the lender has yet to examine your credit report and your FICO credit score to determine your full credit risk profile.

Pre-Approval

A loan pre-approval, in writing, is the amount a lender guarantees1 they'll lend you, based on a thorough analysis of your application. This is what you need to have Buying Power. Not only does your pre-approval give you the security of shopping for a home you know you can afford, it also makes it far more likely your offer, when you're ready to make one, will be accepted. Being pre-approved for a loan tells the seller you're a serious buyer, ready and able to move to closing. That's the kind of negotiating leverage you want in any market!


1 - Typically conditional on the accuracy and validity of your credit picture as portrayed in your loan application, with no significant changes to your financial position or status prior to closing. A loan pre-approval letter is not the same as loan committment.