7 Things to Know about Pre-Qualifications

All Right!  You have your pre-qualification, and you can buy a house!

Here are a few things to remember about a pre-qualification:

Pre-Quals show you how much you can borrow, and most lenders now are also putting the maximum purchase price on the paperwork as well.  It is the lender's responsibility to help you choose the best program for you. It is your Realtor's responsibility to find homes that will allow your type of loan. Here are some common mistakes people make when referring to their qualification:

1) Not all pre-quals work for every house.  A Seller may decide that they do not want to accept VA loans, or FHA loans.  Most everyone will accept a conventional loan.

2)  Your pre-qual tells the Seller how much you are qualified to borrow, who is loaning the money, and what loan program you are using.  If there are multiple offers, the Seller will take all of this into consideration.

3) You still have to make a down payment!  If you have a pre-qualification for $100,000, you still have to come up with a down payment of at least $3,500, or more depending on the loan program

4)  Pre-qualifications are loan program dependent - If you are pre-qualified for an FHA loan, you cannot switch to a conventional loan without obtaining a separate pre-qual, and vice-versa.

5) Pre-quals do not take into account CLOSING COSTS.  They say how much you can borrow, and how much you have to put down, but they don't tell the whole story.  Your lender should have covered this with you when they issued your pre-qual.

6) Pre-quals are only as good as the lender that makes them.  Check to see if you have a reputable lender.  If not, or if your lender is a very small company, the Seller could turn your offer down because the lender is not well known.  If your lender is small or unknown, get some material from your lender to tell the Seller about your lender's history and background.  Give the Seller some confidence that the lender knows his stuff.

7) A pre-qual without documentation is almost worthless.  If you have a pre-qual but you have only talked on the phone with your lender, the Seller is likely to reject or at least stall your offer until the documentation is complete.


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