After your initial conversation about prequalifying and after determining what you feel comfortable with as your “max purchase price,” it is strongly recommended, if not necessary, that you get preapproved for a loan. This is not just getting credit-approved, like some banks like to call it.
In a preapproval, you go through the entire loan process. You complete and submit an application, your credit report gets pulled, and your complete income and asset profiles are reviewed and documented. This full loan package then gets submitted to a lender for an underwriter to review and either approve, suspend, or deny. If we receive a loan preapproval from the underwriter, we will be issued a written commitment letter from the bank. This will state that you as a buyer are preapproved to purchase a home up to x amount with a max loan amount of x. The preapproval will reflect the conditions of the loan, usually pertaining to property (fully executed purchase agreement, preliminary title report and appraisal, among a few other standard conditions).
At this point, you will be armed and ready with this letter to make offers, showing the sellers that you have a loan from a bank backing up your offer.
It is also a good idea to go through the preapproval process before looking at homes because you get to take care of the financial aspect ahead of time, without scrambling and rushing to take care of it while you’re trying to deal with the details of the home situation. Trust me, you’ll have enough to deal with on that end; it will be nice to take care of this ahead of time, while you can do it so that you will feel totally confident in your decision to buy, both practically and emotionally, and without feeling rushed.
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