Loan Pre Qualification In A Nut Shell
There is some confusion in regards to loan pre qualification. Individuals tend to think that by pre-qualifying they'll have all they need in order to start shopping for a property. Actually, pre-qualifying will let them start looking for a property knowing that they have high chances of getting approved for that amount and those terms but that loan pre qualification is not based on a thorough analysis of your income and credit and thus, there is no guarantee that you will get approved.
This usually means that the final loan will have different terms than the ones stated in the loan pre qualification letter and this usually has further implications such as: you'll need to be careful to provide true information to the lender so the pre-qualifying is as adequate as possible and you should have some savings in case the amount you're being lent is a bit lower than what might have expected.
Here is loan pre qualification in a nut shell.
When you contact a mortgage loan lender in order to obtain a loan quote, the lender will present you with an offer for which you will qualify only if your financial and credit situations are exactly as you stated and if there are no additional variables that can modify their decision. Therefore, it is possible for you to request that the lender put this into a written loan pre qualification letter in order for you to use that information to shop for a suitable property.
One also needs to understand that legally speaking, there is no obligation for the lender to comply with that offer because they will state that the loan approval is subject to a credit and financial analysis for the actual qualification to take place. This means that you need to be extremely sincere with the lender because if there is something, they will find out eventually, and you need to be prepared for unexpected situations that can shrink the amount of money you will actually obtain.