Posts Tagged ‘mortgage application’

Should You Get Pre-Qualified for a Home Loan?

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Getting pre-qualified or pre-approved for a mortgage when looking for a house says a lot about you as a prospective buyer. However, not everyone chooses that before going home shopping. As a potential buyer, what does your status – as prequalified or not – say to sellers and lenders?

Your seriousness about buying shows.

When you’re buying a home, being pre-qualified or pre-approved communicates a great deal to sellers. If you are neither pre-qualified nor pre-approved, you’re probably just starting out as a home shopper. Therefore, sellers may take you less seriously, and may decline to consider your offer at all if they have multiple offers on the table.

Consequently, if you’re intent on buying a home, you benefit by being either pre-qualified or pre-approved before beginning.

What pre-qualified means.

Pre-qualification is the first step of potentially getting approved for a home loan. Pre-qualified individuals have passed a basic screening with lenders and are eligible to proceed on to the next step of the qualification process.

Basically, pre-qualification is an invitation to fill out a mortgage application and detailed mortgage paperwork to determine whether or not you’re eligible for a home loan. Pre-qualified does not mean you are guaranteed a loan. Therefore, you can’t assume you can automatically get a mortgage if you receive a pre-qualification letter.

What pre-approved means.

Pre-approval is a next step for prospective home buyers. When you are pre-approved, mortgage lenders have taken a detailed look at your financial situation and are  willing to offer you a loan up to x dollar amount. Pre-approval still doesn’t mean you’re guaranteed a loan; the property and the terms must meet certain conditions in order for the lender to generate a loan.

However, pre-approval means you can get ‘that much money’ from the lender if everything lines up. Sellers know you’re serious and ready to buy.

Using equity to create wealth.

If you’re following our Equity Cycling plan, you already know it’s based on the concept of letting your mortgage make you rich. In other words, instead of being a drain on your balance sheet, your home can become an asset you leverage it to your favor. (A residence is not automatically an asset; it starts – unless it’s paid for – as a liability.)

The idea is a simple one. Using your house to pay for your house, or using a line of credit for accelerated debt reduction, can get you to the super-positive side of a balance sheet much faster.

In essence, you’re putting money into, and taking money out of, an equity line of credit (HELOC, or alternative acceleration account, such as a checking account) in a way that it can seem like you have twice as much cash flow as you really have. And we all know wealth is about cash flow, right?

If this seems a little confusing or hocus-pocus, join in on one of our free presentations on mortgage acceleration and debt reduction.

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