Pre-Qualification vs. Pre-Approval: What’s the Difference?
If you are starting the home buying process, you may have heard that you need to get pre-qualified or pre-approved. Although many people use these terms interchangeably, there are very important differences between the two terms that every homebuyer should understand.
Pre-qualification is seen as the first step in the mortgage process, and is usually done over the phone or online with a Loan Originator. You provide the lender with an overall financial picture, including your debt, income, and assets. The lender reviews everything and gives you an estimate of how much you can expect to borrow. Pre-qualification is based solely on the information you provide to the lender and can give you a starting point for your homebuying search.
A pre-approval can be done first or as a next step after pre-qualification. It requires the borrower to complete an official mortgage application and supply all the necessary documentation to perform an extensive check on your financial history and current credit rating. During the pre-approval process, you will discuss product and rate options because this is often based, in part, on your credit score. You may even lock in an interest rate. You will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. Pre-approval puts you at advantage when you are negotiating with a seller because they know you are one step closer to being able to afford their home.
The advantage of completing both steps before you begin house hunting is that you will have a good idea in advance of how much you can afford. You won’t waste time with guessing or looking at properties that are beyond you means. The pre-approval also enables you to move quickly when you find the perfect home, because the seller knows that your offer is serious, especially in a competitive market.
Tips and Tricks for First Time Homebuyers
- Start with a realtor that you trust. You might be spending a lot of time with this person. Make sure it’s a good fit.
- Get Pre-approved or at the very least pre-qualified. Make sure you know how much house you can afford BEFORE you start looking. Shopping for anything without a budget will only set you up for failure and disappointment.
- Know your deal breakers. It’s important to know your WANTS vs. your NEEDS and to remind yourself of them while you’re looking for houses.
- Take pictures! Start each photo with a picture of the house flyer with the address. You’ll thank yourself later. This will make life MUCH easier when you’re going back and looking at them. Also, make sure to take pictures of the home’s greatest strengths, but also any issues you see.
- Take notes! Keeping your thoughts organized about each home you view is key. Make sure to take notes as you go, or immediately after viewing EACH home you see. You won’t remember everything when you get home so this will be key when reevaluating the homes you’ve seen.
- Don’t just focus on the home. it’s easy to get caught up with the new white kitchen or beautiful hardwood floors, but you need to be careful. Make sure to take note the area surrounding the home. Will your commute to work be easy? Does the neighborhood meet my needs? (If you’re starting a family, a quiet street might be preferred over a busy one). Swapping out countertops or backsplash is relatively easy. Picking up the entire house and moving it to a more preferred neighborhood… not so much.
- Lastly, trust your gut. For some people, it might take viewing 20 homes to finally find the right one. But, for others, it might be the first or second home you visit. If you’re confident that you’ve found the right home, embrace that feeling.
There are few people you can learn better from than the ones who have been there/done that...
There are few people you can learn better from than those who have been there and done that. In her Forbes article outlining her first-time home buying experience, Julia Dellitt names a few things she did not expect during the process.
Dellitt and her family were living in an apartment, finally ready to make the big move. So, they did their homework — checking their credit, getting pre-approved for a loan, finding a Realtor they wanted to work with, and doing the rounds at open houses on weekends. On that first weekend, they made an offer, only to find the experience not quite as simple as it had looked on HGTV.
While they eventually found just the right house, here are a few things she says they learned. A big one was not even a consideration at the beginning of their house hunting expedition — transition. Because they were renters and started looking for a home about three months before the lease on their apartment ended, they assumed they’d have plenty of time to find something, and if that were not the case, they could rent month-to-month. Instead, the exact opposite happened. They ended up having to cover both their new mortgage and previous rent for a month. According to many real estate experts, this is something home buyers see as a worst-case scenario, so they don’t plan for it. Having some extra contingency funds for expenses that are more than anticipated (movers, closing costs, extra taxes, etc.) helps you avoid unnecessary financial headaches on top of such a significant investment.
It’s easy to chuckle at picky home shoppers when watching real estate reality TV shows, but when you see properties in real life, you can surprise yourself — becoming one of the very people you criticize when watching those shows. Dellitt advises would-be home buyers to stop sweating about the small stuff that can be easily fixed like ugly wallpaper, old vinyl floors or melamine counter tops, reassuring them that so much can be changed or fixed along the way.
Another thing rookie home buyers tend not to focus on is how their wish list may be unrealistic within their own budget. If you want an attached garage, a fenced-in backyard, and a downtown location, there is a point at which you may find those three things are incompatible. In the end, Dellitt and her family found a home in a quiet cul-de-sac with everything they wanted, but it was about ten minutes from the downtown area — not their original plan.
Her final warnings involve how unexpected paperwork can show up in your mailbox a while after your move — things like a request for a title abstract, or perhaps supplemental property tax bills, etc. And then there was the inspection that had been performed. She speaks of deferred maintenance items she knows she and her husband will no doubt have to address in the future — some small fixes and others will take a bit of budgeting. For the items that needed immediate attention, they negotiated with the seller and got bids from contractors.
Is the drama worth it? “Despite almost losing our home of choice, I’m so glad we stuck to our guns,” says Dellitt. She encourages first-time buyers to ask questions, even if they sound like dumb ones. Don’t get hung up on how much you don’t know. “These feelings popped up big-time during the house-hunting process, especially when I blasted our Realtor with ten questions a day via text and email. But you know what? Good real estate agents want you to feel equipped and informed...”
Source: Forbes, TBWS
Pea Pappardelle Pasta is a healthy spring time dish for you and your family to enjoy. This dish has a delicious flavor and makes for a nice and light lunch.
- 8 oz dried uncooked egg pappardelle pasta
- 6 oz fresh sugar snap peas
- 1 cup shelled green peas
- ¾ cup pea shoots
- 3 tbsp extra-virgin olive oil
- 1 tbsp lemon juice
- 1 tbsp grated lemon rind
- 1/8 tsp crushed red pepper
- ½ tsp kosher salt
- ½ tsp black pepper
- 2½ oz ricotta salata
- 2 tbsp chopped fresh basil
Serving Size: 4
Fill a large pot with water. Set stove to high and bring water to a boil. Add the snap peas to the pot and cook until they are a bright green (about 1 minute). Fill a bowl with ice water and put in the snap peas. Let them sit. With the remaining boiled water, cook pasta for 4 minutes or until al dente. Add the green peas for the last 30 seconds. Drain and cool for 5 minutes. Drain the snap peas and cut them in half diagonally.
In a separate large bowl, combine the lemon rind, juice, salt, black pepper, crushed red pepper, and olive oil. Stir mixture with a metal whisk.
Add pasta, pea shoots, and snap peas to the mixture. Toss to coat. Plate the pasta and top with the cheese and basil.
It never really ends. You move into a house and after a while, you realize there is always something you could be doing to improve your environment, make your home look more appealing, or just change things up. Even if you don’t have much of a budget, however, think of small things you can do that make a difference, both in how you live in your home as well as how it looks. Apartment Therapy’s Brigitt Earley asked a consortium of Realtors, contractors and designers to offer up the easiest and least expensive home upgrades — things that can be attacked on the average weekend.
Painting your front door is a no-brainer. But consensus tells us from this particular study that painting it black or charcoal gray adds around $6300 to its value when sold. Even if it sounds like a grim color for a front door greeting, the neutral palate seems to appeal to would-be buyers.“Adding a smart thermostat to your home is a project that will offer homeowners a projected 23 percent savings on their heating and cooling,” says one Realtor.
Since heating and cooling account for about 40 percent of your home’s utility costs, depending on the size of your home, it could pay for itself within the first year.Another Realtor in the study says to focus on the simplest visual upgrades like cleaning and painting, both of which can make a big difference. If you can’t paint an entire room, focus on door frames and baseboards to give the room a shot in the arm.
Hardware exists all over your home — from doorknobs to cabinet handles and pulls. Swapping them out can instantly make your home’s interior look better. Designers agree it’s not important to do the matchy-matchy, either, perhaps apart from matching like items. “Source unique pieces. Mixing it up adds a lot more visual interest to your home.
Faucets, window coverings, outlet covers, and even sprucing up your mailbox can add to the visual appeal of your home. In the meantime, it can make living there feel even more special. It’s important to think of a home as an entity that needs constant attention, updating, and maintenance, just as humans do.
Source: Apartment Therapy, TBWS