The first step you should do if you’re considering buying a house is to be pre-approved. The pre-approval procedure enables you to make an offer that the sellers will take seriously and assists you in determining your loan qualifying.
However, the majority of mortgage lenders and loan officers do not inform you about three important parts of pre-approval.
1.The preapproved number is provisional
The qualification amount shown in the preapproval letter is provisional once it has been granted to you. Several factors determine how much of a loan you qualify for, and any one of them changing could modify your qualification number. The amount may vary depending on the type of property, where it is located, your income, assets, credit score, and even the direction of interest rates. The preapproval amount is determined by a specific debt-to-income ratio that takes into account both the expected payment for the home you intend to buy and the monthly obligation you have to your current obligations. Future house payments may increase when interest rates rise in an economy with rising rates. Similarly, if you were planning to buy a single-family house and now wish to buy a Condominium, monthly HOA dues need to be paid. All of this, in addition to a number of other previously mentioned elements, may raise your future housing payment and decrease your qualification amount.
2. Your loan can still get declined even if you are pre-approved
Even if you are pre-approved, your loan could still be rejected because not all lenders make an attempt to thoroughly review your qualification during the pre-approval stage. They only conduct a superficial analysis before issuing a pre-approval letter. Pre-approval letters from some internet lenders are known for being hastily written and doing a poor job of determining your loan eligibility. It is preferable to take more time and provide more details now rather than regret it later on when your offer is accepted but the loan is rejected. Additionally, even if the lender thoroughly examined your eligibility, the loan could still be rejected for other reasons, such as problems with the property or any later-discovered facts.
3. The pre-approval process can impact your credit score
Your credit score may be negatively impacted each time you have your credit pulled as a result of the pre-approval procedure. Sometimes, a credit score adjustment of just one point can mean the difference between being approved for a lending program or not. Your interest rate is significantly influenced by your credit score as well; normally, the worse your credit score, the higher your rate will be. However, a credit check is necessary for a thorough analysis of your loan eligibility; without it, mortgage lenders are unable to determine your true eligibility. The credit agencies do not consider a soft-pull option for your credit to be an inquiry, therefore it has no effect on your credit score. However, a few lenders now provide this service. Think about working with these lenders.
Even after receiving pre-approval, the greatest thing you can do is to stay in close contact with your loan officer and go over any changes to your qualification requirements.
