If you plan to take out a mortgage loan in order to purchase a luxury home, it is a good idea to get pre-approval for a loan. Not only can pre-approval provide you with a bit of negotiating power, but it can also help you improve your chances of getting the home of your dreams as quickly as possible. Here are a few of the basics that you need to know and understand about the pre-approval process and how it can benefit you.
Understanding the Difference Between Pre-Qualification and Pre-Approval
Some home buyers get the terms “pre-qualification” and “pre-approval” confused, but there are some very important differences between the two. Pre-qualification simply involves estimating how much you can borrow after answering a few simple questions about your financial history and status. Pre-approval, on the other hand involves actually going through the loan application process and determining how much the lender is committed to loaning to you.
The Benefits of Pre-Approval
Getting pre-approved for a loan offers many benefits. First, it tells you precisely how much money you can borrow from the lender, thereby helping you to narrow down your options. Second, since you have already gone through the loan approval process, it will take you much less time to purchase the home once you find the one that you want to buy. The fact that you have already been pre-approved for a loan will also look good to a seller who is considering multiple offers. Since your loan has already been approved, the seller is more likely to accept your offer, even if your offer is for slightly less than other interested buyers.
Getting a Pre-Approved Mortgage Loan
To obtain pre-approval for a mortgage loan, you will need to go through the same steps that are necessary for obtaining a mortgage loan. Documents that you will likely be required to produce include federal tax returns, Form 1099s or W-2s from the last two years to verify your finances. You will also need to provide copies of your current banking and financial records. You will also need to demonstrate where the money in your bank account came from, as the lender will want to distinguish between savings that came from income, gifts or investments. If any of the funds were gifts, you will need to present a letter from the person who provided the gift stating that the money was a gift and not a loan that needs to be repaid. You will also be required to prove ownership of all assets.
Of course, your credit will also be considered when you apply for a pre-approved mortgage loan. Your credit will be compared to your income when determining your creditworthiness. To ensure this process goes as smoothly as possible, it is beneficial to obtain a copy of your credit report beforehand so you can address and correct any errors that may be in your report.
The lender will also need to check the applicant’s credit to compare it to the applicant’s income. Many people refuse the credit check because they are afraid it will impact their credit score, but the impact is very low and the lender needs this information. It is also a good way to learn about any errors in the credit report early, before they can pose a problem down the line.
The process is not nearly as intimidating as it appears, and an experienced mortgage specialist can help you prepare everything you need well in advance of applying for pre-approval.
Once you are ready and are looking to Los Angeles or surrounding areas for your perfect home, contact our team of real estate experts to help you with your search. We specialize in luxury homes within Southern California’s most exclusive neighborhoods.
Look into these properties below to get started on your search for your perfect home. Homes listed below are priced from $1 Million to $3 Million.
$1,499,950 : 2360 Panorama, Los Angeles3 beds, 3 baths
$1,495,000 : 5752 SPRING OAK Terrace, Los Angeles4 beds, 4 baths
$2,900,000 : 6846 Pacific View Drive, Los Angeles4 beds, 5 baths
$1,350,000 : 8009 EMERSON Avenue, Los Angeles3 beds, 2 baths
$2,500,000 : 3655 S BARRINGTON Avenue, Los Angeles0 beds, 0 bath
See all City of Los Angeles Luxury Homes For Sale.
(all data current as of 6/22/2017)
Listing information deemed reliable but not guaranteed. Read full disclaimer.