Should you ask your lender for a “pre-qualification letter” or a “pre-approval letter” to know if you can buy a home in Harrisonburg or Rockingham County?
Assuming you plan to finance a portion of your purchase, you will want to meet with at least one mortgage lender or broker at the beginning of your process so you can know the answer to an important question: “How much money can will bank lend me for a home?” That dollar amount helps focus the home search.
There are many professional and qualified lenders in the local area who can evaluate your financial position and give you an idea of what you can pay to buy a home (contact us if you need a few suggestions for professional lenders).
Pre-Qualification vs Pre-Approval
It is common to confuse these two very different analyses. Pre-qualification letters and pre-approval letters are both useful, but only one carries with it the credibility of a full study of financial history.
- “Pre-Qualification” – A Ballpark Estimate
With some basic information about your income, credit history, and current debt, a lender can usually issue a pre-qualification within a day or so – sometimes within an hour. A pre-qualification is an educated guess about how much home you can afford to buy. It can be done in a quick meeting, over the phone, and even online – and it’s usually free.
A pre-qualification is a starting point to understand how much of a mortgage you can afford, but it does not take all aspects of your financial history into account. It’s a ballpark figure, that can change with a more detailed analysis. Because a pre-qualification is based surface level information – perhaps without any documentation, credit check, or proof of income – it should not be relied on as completely accurate.
- “Pre-Approval” Letter – The Real Deal
A pre-approval letter carries much more weight and is an important step in buying a home in Harrisonburg and Rockingham County. A pre-approval analysis requires documents such as tax records, proof of income, bank statements, credits reports, current debt-to-income ratio, and more.
By the end of this pre-approval analysis, a lender can give a confident estimate of how much of a mortgage you can afford. Showing a pre-approval letter to a seller can give them confidence in your offer to buy a home in Harrisonburg or Rockingham County.
So, if you are very early in your home search process and just curious about what you might be able to afford, get a pre-qualification letter. If you then plan to get more serious, contact the Kai Degner Homes Team to start your home search and simultaneously begin the process to get a pre-approval letter.
Questions about real estate in Harrisonburg or Rockingham County? Contact the Kai Degner Homes Team anytime!