A pre-qualification is mostly floated by lenders and mortgage brokers to get your email address and phone number
We get many calls from frustrated buyers asking why they received a pre-qualification for a mortgage, are then pre-approved for significantly less, and then struggle to get the mortgage on a home when they thought they were pre-approved.
A pre-approval isn’t a guarantee that you’ll get a mortgage
Lenders issue mortgages on a per-property basis. It is only when you have bought a home that you can get a mortgage for it.
Pre-qualifying is a gimmick
A pre-qualified mortgage is numbers generated by an online calculator. It’s purpose is to collect your email address and phone number so that the lender or broker can contact you. It is a marketing gimmick.
Of the two, a pre-approval is a better indicator of your ability to buy a home. Lenders typically offer an interest rate for 120 days when they pre-approve you.
A pre-approval is still is not a mortgage. Mortgages are specific to the property that you’ve purchased. You buy the property and then get the mortgage – that’s why it is important to know exactly what you can afford and where a good mortgage broker can give you peace of mind.
The best thing to do is have a broker review your situation before you start home shopping. It’s like taking your car to the mechanic for a once-over before winter arrives.
- Credit Analysis – what is your score? What is reporting? How can we optimize the situation?
- Income – has this been reviewed? How does it stack up with the three measures that every Lender follows to confirm?
- Down Payment & Closing Costs – where are the funds? Are you budgeting for the various closing costs that come up before closing?
When you’re making an offer on a property (or even just considering it), have your Realtor send the property’s MLS listing to your broker so that they can conduct a property review that highlights potential lender red flags.