Badger Peabody & Smith is committed to helping our clients understand the loan and mortgage process and how they can put themselves in an advantageous position when making an offer. In this current market, a letter of prequalification can be a vitally important tool when making an offer contingent on financing.
When a letter of pre-qualification is presented, it helps paint a clearer picture for both the buyer and the seller. For the buyer, they receive an estimate of not only various loan terms that they could qualify for, but also how much they could potentially borrow. The buyer then can work with a BP&S agent to determine which properties are realistically in their reach, based off the letter of pre-qualification. For sellers, when they are presented with an offer on their property accompanied by a letter of pre-qualification, they know that the buyer has already gone through the initial step of applying for a loan, which could potentially speed up the financing process.
When a buyer applies for pre-qualification, there are certain pieces of information that the lender will need. At BP&S, we recommend that you keep all your financial information on file, including income, expenses, debt, savings, and credit score, so that you can provide it to the lender quickly and accurately. The lender will then determine your debt-to-income ratio and use it to determine your level of pre-qualification.
Many of our buyers worry that their credit will be negatively affected if they apply for pre-qualification. That is not true. First, while a letter of prequalification can be presented with an offer, on its own, the letter is not binding and only an estimate. Second, it is important to not confuse prequalification with preapproval. Preapproval is much more of a process with the lender and cannot start until it is determined that the buyer is prequalified. If prequalification is the first step when applying for a mortgage/loan, preapproval is the second.
If you are a buyer thinking about prequalification, Badger Peabody & Smith agents are trained to assist buyers in many facets and can recommend several local lenders to work with.
Reach out to a Badger Peabody & Smith agent today!