Yes, you should be pre-qualified
Buyers who want a leg up in a super competitive market (like the one we’re in right now), need to do everything possible to make their offer seem solid. There are several parts of an offer, including the price, the terms, and the likelihood that a mortgage will be secured.
Pre-qualified vs. Pre-approved
A common misconception for home buyers, especially first timers, is the lack of distinction between being pre-qualified versus pre-approved for a mortgage. The two sound similar, but they’re actually not the same.
A pre-qualification can often happen over the phone and is generally based on information the borrower supplies. In other words, you as the buyer would provide data to get a quick idea of how much of a mortgage you’d likely qualify for. It’s not a sure thing. What you receive through a pre-qualification is a conditional commitment for an exact amount that will be loaned after you’ve been properly pre-approved.
A pre-approval, on the other hand, goes a lot deeper. To get one, a borrower must complete an official mortgage application and supply all the information necessary for an extensive credit check to be conducted. Since the mortgage lender will be scrutinizing the numbers, a pre-approval carries much more weight: It’s a strong indication of exactly what an institution is willing to lend the borrower.
After the offer
Once an offer is agreed upon and the legal contracts are drawn up, the buyer must provide their lender with the purchase agreement so the underwriting process can begin. A bank appraisal will be conducted on the property, so the lender is assured of the home’s value. If everything checks out, a loan commitment will be issued.
Embrace the process
Buying a home is exciting, but it’s also a process that takes some time. Deals don’t happen overnight, nor should they. The transfer of real property is a binding legal transaction and needs to be done correctly. The best way to avoid wasting time or setting unrealistic expectations during your home search is to begin with the financial reality check of a pre-approval.
