What is a Pre-Qualification or Credit Approval and Why Do I Need One?
A Question-and-Answer Session with Rick Garber, Mortgage Loan Officer at Cambridge Savings Bank
Cambridge Savings Bank
Rick Garber | NMLS #68671
Cambridge Savings Bank | NMLS #543370
A Question-and-Answer Session with Rick Garber, Mortgage Loan Officer at Cambridge Savings Bank
Tell me about yourself. How long have you been in the mortgage business with Cambridge Savings Bank (CSB)?
I’ve been in the mortgage business with CSB for over 25 years.
I really believe in the power of making genuine connections with my borrowers and know how daunting the mortgage process can be. To me, that’s why it’s so important for borrowers to feel like their lender is a true partner to them throughout the process. There’s nothing I like to see more than one of my borrowers with the keys to their new home in hand.
What is a credit approval or a pre-qualification?
First – it’s important to understand that there are many names that may be used for this part of your mortgage process but they are often used interchangeably and for the most part, mean the same thing.
Getting a pre-qualification or a credit approval is a great place to start if you are looking to understand how much home you can afford. The estimated purchase price and loan amount that comes from this step will be based on the verbal information that you provide to the lender. At CSB, it is also backed by running your information through an automated underwriting system. In addition, CSB also pulls your credit report for this process. Getting a pre-qualification or a credit approval is the first step in the mortgage process for many borrowers and is a good way to get an initial estimate.
Where can I get pre-qualified or credit approved?
A reputable lender should be able to help you with getting pre-qualified or getting credit approved.
With CSB, you can submit a credit approval application on our website or reach out to one of our mortgage loan officers to start the process.
How long does a credit approval or pre-qualification take and how long is it good for?
These can typically be completed within 24-48 hours and are good anywhere from 90-120 days but it can vary by lender.
Is there a fee associated with a credit approval or pre-qualification?
Generally, there is no fee with most lenders and CSB does not charge a fee.
Why is a credit approval or pre-qualification important?
Credit approvals or pre-qualifications help sellers to understand that you have the finances needed to purchase their home and that you are backed by a reputable lender who has evaluated your financial situation.
In the current market, it can help you to have a stronger offer and some real estate agents may not even accept an offer without it.
What should I look out for with getting pre-qualified or getting credit approved?
It’s not a commitment to lend.
While a pre-qualification or a credit approval can help you to understand how much you can borrow, they are not guarantees of what or if a lender will lend to you. That commitment comes during the application process.
It can impact your credit score.
As part of the pre-qualification or credit approval process, your credit report may be pulled and doing so too frequently can have an impact to your credit score.
You may not want to borrow up to the full amount.
As part of the pre-qualification or credit approval process, the lender provides you with a loan amount that you can afford based on your employment and income. However, it likely does not take into account all of your ongoing expenses.
When assessing homes for purchase, you may want to consider if you truly want to spend up to the full amount you have been approved for. It’s a good idea to evaluate your current expenses and lifestyle. You may want to ask yourself if you would have to modify them to afford the home.
What happens after obtaining the credit approval or pre-qualification?
You’ll be able to start making strong offers with a credit approval or pre-qualification letter in hand.
Once – fingers crossed! – your offer is accepted, you can then go back to your lender to start the mortgage application process and begin to secure the funding for your new home loan.
If you’d like to learn a little more about the mortgage application process, please check out our Your Mortgage Journey video series where our mortgage loan officers walk you through it.
