Two words people should understand are Prequalified and Preapproved. Buyers and Sellers should know the difference. It is important.
I will quote the Consumer Financial Protection Bureau site: “Prequalification is a lender’s estimate of how much you could be eligible to borrow based on information you supply. Prequalification does not mean you will get the loan and are usually free.
Preapproval usually means that the lender is ready to make you a mortgage loan based on the information and documentation you provided at the time you requested a preapproval. The preapproval will say how long it is valid for and may contain some other conditions for you to get the loan. Your lender may not require that you pay any fees except the cost of a credit report at this time.”
Why is this important to a buyer? When you go to make an offer, the seller knows that you will be able to get the loan. As a seller, you do not want to tie your property up with an offer where the buyer may not get a loan. Agents want to make sure the sale is more secure. As a seller, I would give more credence to an offer with a preapproval, and as a buyer, I want to be preapproved. One thing I like about being preapproved is that I know what price range I should be considering. Waste of my time to be looking above my pay grade.
Yes, it can take some work to get a preapproval. Being self-employed this means submitting tax returns and all your credit information. In today’s market multiple offers are returning. Buyers get preapproved, even if you have to spend a little time. Real Estaters are finding that inventories are low. So be ready to move when you see a fine home and do not low ball offers. If you don’t do these things you will be looking for a home for a long time.