Obtaining financing is one of the most important steps in buying a Boston luxury condo and the earlier you do it, the better. Everyone’s financial situation and goals are different, that is why it is not as simple as taking your monthly salary and taking x percentage of it to arrive at qualifying number.
What is a Pre-Qualification?
A pre-qualification is a form of a pre approval without any document verification. The loan officer will ask you about your debts, assets and income and based on your verbal information, this will give you a sense of what you might qualify for. Some Boston condo buyers who don’t get pre-qualified get a big surprise when they proceed further along the loan approval process and are denied. Just because a bank loan officer gives you a pre-qualification doesn’t mean you’ll get a pre-approval.
What is a Pre-Approval?
A mortgage pre-approval is a document issued by a lender which gives their written commitment to a potential borrower. The lender will want to see some documentation from the borrower, especially their bank statements, tax returns for the past several years, employment verification, and a credit report. This process does not have to take a substantial amount of time.
The pre-approval is not the final approval – that takes much longer. You also need to have a Boston condo selected before the loan can be given because there are a number of conditions that pertain to the condominium, such as an appraisal. In addition, unlike a singe-family home, with a Boston condo there are additional conditions the lender will look at such as the condo building, things like owner/renter ratio, reserve balances, right of first refusal, special assessments and more.
Why You Should Get Pre-Approved For A Mortgage?
There are a number of good reasons why you want to get pre-approved for a mortgage, including:
- Know your spending limits. It doesn’t do much good to start looking at Boston luxury condos before you know what you can afford. You also might be surprised to learn you can borrow more than you think you can. Getting pre-approved serves as a good reality check and gives you an advantage when your Boston broker submits your officer
- Eliminate disappointment. You may think you have great credit and know what you can afford, but guess what? That doesn’t matter. What matters is what the lender thinks about your credit and what you can afford.
- Correct credit problems. Many loan programs have a certain minimum credit score and the interest rate you are charged is also partly based on your credit score. Your credit score is very important. Your credit report might also have some errors in it. When you get pre-approved, the lender will pull a credit report (with your permission of course) and let you know if there are any bad marks. For many credit issues, you can do something about it to correct it. Maybe there was an outstanding collection you didn’t know about. Maybe you need to pay down a credit card. Maybe there is a factual mistake on the report that is not yours. By getting pre-approved early, you have time to correct some issues.
- Seller will want to see a pre-approval letter. When it comes times to write an offer on your dream home, the seller will most likely want to see a pre-approval letter to know you can can actually afford it. You don’t want to miss out on an opportunity just because you didn’t get pre-approved, would you?
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