“Power” is not a word you typically associate with obtaining financing for a home purchase, but it should be. Your power source: pre-qualification.
What in the world is “Pre-qualification”?
The pre-qualification process allows you – and the prospective seller – to know you are qualified to finance a certain amount of money, even though you haven’t yet found the actual home you’d like to purchase.
What’s the difference between a Pre-Qualification and a Pre-Approval?
A prequalification is the first step you take in the mortgage process. During a prequalification, your mortgage advisor will want to know a general overview of your income, assets and debt. With the information in mind the Mortgage Advisor can give you a pre-qualification letter if they believe you would be able to purchase a home based off of the general information they know from you.
A preapproval letter is the next step in the process and is usually a detailed look at your financial background. During a preapproval, you will have to provide documentation of your income and assets which will help give the mortgage advisor a better idea of exactly how much you qualify for and what your interest rate would look like. (Read more about Pre-Approvals for a home purchase here)
Why is Pre-qualification so Powerful?
In a nutshell, pre-qualification lets home sellers know that you are a serious prospect – as opposed to tire kickers. Your pre-qualification letter can be used as a bargaining chip.
For example, let’s assume you find your dream home next week. The seller has two buyers in front of them making an offer on the house. One (you) is pre-qualified with a mortgage and ready to commit. The other potential buyer is just starting the process. Which buyer is the seller more likely to give priority?
Bonus: Another nice benefit of being pre-qualified is that we’ll be much less likely to hit unforeseen snags later on down the road.
How do I get Pre-qualified?
The pre-qualification process is quite simple. You and a Mortgage Advisor at Absolute Mortgage Issaquah will briefly analyze your financial situation and determine how much home you can comfortably finance. They will also ask you to fill out a mortgage application. Meanwhile, it would be a great idea for you to begin compiling supporting documentation such as:
Recent paycheck stubs
Last two years tax returns
Bank and brokerage statements
The team at Issaquah will pre-process your file just as if you’ve found the home you’d like to purchase. However, for now, we’ll hold off on official processing steps such as the appraisal, survey and title work.
With a pre-qualification letter in hand, you’ll be ready to embark on the journey of finding and negotiating the purchase of the home. Best of all, you have the power in your hands.