What is the purpose of a pre-approval?
Brilliant question! We're glad you asked! The purpose of pre-approval or a pre-qualification is to give all parties involved in a potential home sale or purchase the right information.
The right information is specifically: "can this actually happen?"
You see, without a pre-approval or pre-qualification, then we're having to go off of each person's intentions, hopes, aspirations, what? Should we go off of what they want to look at and would like to buy. Unfortunately anyone in the real estate industry has spoken with countless people who are "going to buy a house at X price point," only to find out that they're qualified to buy half of that price or nothing at all.
In truth we often find that there exists a disconnect between what we want and what we can buy. A lot of this is not nefarious at all. It comes down to a lack of information. For this very reason pre-approvals consultations, where you figuratively sit down with a lender and have a quick conversation and say, "here is my income and here are my debts. Here's our total financial picture. We'd like to buy a house."
That lender, who is qualified to speak on those types of loan products will say "in light of what you've shared, it looks like you'll be qualified for this type of loan for this type of purchase price. That would mean you need this much for down payments."
And if you say, oh, I don't have that for the down payment, then they can crunch the numbers and revise the purchase price, but you should walk away with, from that conversation with a good understanding of in general, how valuable of a home can you purchase and what will that mean for you in terms of down payment and approximate monthly expenses for the principal, interest taxes and insurance, not your holistic home owning expenses.
This is what a pre-approval or a pre-qualification letter is for.
And if you would like a recommendation of a savvy, knowledgeable and trustworthy person to speak with, to get pre-approved, let us know, and we will make sure.
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