So it is official – you are starting your search for your new home in sunny Myrtle Beach, SC! You are probably experiencing a lot of excitement, mixed with a little confusion, topped with a tad bit of anxiety. We understand all the emotions that surround the home buying process and know that things may seem a little overwhelming and cumbersome in the beginning. Especially if you start looking online or find yourself speaking with family/friends about topics that you are not particularly well versed in, such as the prequalification or preapproval process. Does this ring a bell for you? If so, you may want to keep reading.
The terms “prequalification” and “preapproval” are often thrown around in the world of home buying, and for good reason, as they are very important steps for buyers. But do you know what the terms refer to and the differences of each? If not, you are in luck! In today’s blog post we are going to be talking about preapproval and prequalification, as our team here at Jerry Pinkas Reality knows there is a lot of confusion out there about this topic and we wanted to give you the inside scoop. And while the two words sound similar, the fact of the matter is there is a really large difference between the two options, and we want to make sure you understand what they are so you can make the best decision for you and your family.
The Basics
We’ll get into the nitty gritty of what it means to be preapproved vs prequalified, but as a general overview, “prequalified” is the first step you take, and it’s relatively simple and fast—but it also carries less weight in negotiations. “Preapproved” is a second step, that is much more involved, and it takes considerably longer—but being preapproved gives you bargaining power, and enables you to act more quickly on a sale. Now let’s get into the details.
What does it mean to be prequalified?
In the mortgage process, getting prequalified is typically the first step that buyers will go through and, luckily, it is generally pretty simple. What you will do is give your overall financial picture to your banking institution or lender, which may include things such as assets, debts, and incomes. Your lender will then evaluate all the information provided and then proceed to give you an overall idea of the size of the mortgage that you qualify for. This process can typically be done over the phone or online.
Because this is just dipping a toe into the water, you’re only getting a general picture of what you’ll be able to afford, and it doesn’t mean as much if you’re trying to put an offer on a house.
It is important to understand that the loan prequalification process does NOT take into consideration your credit report and does NOT include a comprehensive look at your ability to buy a home. The prequalification process will simply provide you with the amount for which you can potentially expect to be approved for. Because of this, as we will discuss shortly, being a prequalified buyer simply does not carry the same weight as a preapproved home buyer because it is simply an overview. And while this information is very helpful to buyers, you may want to take it one step further if you are serious about buying a home in Myrtle Beach, SC.
This isn’t to say you shouldn’t bother getting prequalified! You should. It just means that this is only the beginning of your home buying process, and that there are more things you need to do. Being prequalified should help you feel good and confident about your future plans, and enable you to make educated decisions as you move forward.
What does it mean to be preapproved?
Now if you are looking to get preapproved, that is a totally different story and tends to be a much more involved process. To be preapproved, buyers will complete an official mortgage application and provide the lender with the requested documentation (i.e. bank statements, credit reports, etc.). They will proceed to do a thorough assessment of all the information to decide the specific mortgage amount that you are approved for. At this time, buyers also have the potential to get a better idea of the interest rate of the loan, which will help spell out their overall financial picture.
Since the preapproval process typically takes around 21 days, starting the process sooner rather than later will allow you to get a leg up in the home buying process. We find that some people wait to get preapproved until they have already begun seriously shopping for their dream home in Myrtle Beach, SC. We wanted to point out the benefit of getting preapproved earlier in the process, as buyers can utilize it to point out potential issues, such as your credit, and give you sufficient time to correct them.
Compared to being prequalified, the preapproval paper is actually worth something and will hold up in the event of a bidding war. This, in turn, can help you avoid some of the costly and stressful roadblocks that have the potential to creep up during the home buying process and keep you ahead of the competition in this hot market in Myrtle Beach, SC.
In other words, prequalified is the most basic estimate of what you can afford, while being preapproved is a solid statement from the lender about what they’ll finance. You’re going to have to get preapproved eventually, so it’s in your best interest to do it soon.
Why should I get preapproved or prequalified for a loan?
It is no secret that the Myrtle Beach, SC market, and the Grand Strand market for that matter, are on fire. People are flocking here from all across the country to enjoy the beautiful beaches, sunny days and enviable lifestyle the area affords its residents. Because of this, properties are selling very fast and, as we spoke about earlier, you may find yourself in a situation where you are in a multiple offer bidding war. So being prepared by going through the process of getting prequalified and/or preapproved has the potential to save you a lot of time and aggravation, as well as help you to make an offer on a home.
How, you ask? Well having the letter from your lender will give the seller more confidence that you are a more suitable buyer because it shows that you will be able to get financing in order to buy the home. And let’s be honest, if a seller sees that you have done your homework and have gone through the financial approval process, they may be more likely to accept your offer versus someone who just threw an offer their way without sufficient backing. It is less of a risk for the seller, which is always appealing.
It is also important for us to point out that some lenders are average, some are way above average and some are excellent. In today’s day and age, the beauty is that the rates are all pretty close, even if the loan is through your hometown bank. If you are looking to deal with a lender locally, we can provide you some recommendations that will save you a lot of time and hassle.
The bottom line is that time is of the essence, and when you see your dream home you’re going to want to pull the trigger as quickly as you can, particularly in this hot Myrtle Beach market. Getting your ducks in a row early (getting prequalified and preapproved) is a smart move.
What should I do if I am interested in buying a home in Myrtle Beach, SC?
As always, give our experienced team here at Jerry Pinkas Realty a call today! We know there is a lot of information out there on the internet, but we also know that the information is not always reliable. And as we said at the beginning of this post, we understand the emotions and confusion that can come with buying a home, especially if you are a first time home buyer and have not gone through any of these processes before. You can trust that our team here at Jerry Pinkas Reality will always be upfront and honest with you because we want you to be prepared for any situation, as well as have success with purchasing your dream home here in Myrtle Beach, SC.
We hope the information in this blog post helps you during the home buying process and eases any stress of confusion that may arise. We want to bring you the information that will not only save you time but save you money and aggravation as well. We have helped many individuals, couples and families navigate the home buying process and settle into their perfect home in Myrtle Beach, SC, and we know we can do the same for you! Allow our experienced team to help you navigate the prequalification and preapproval process and answer any questions that you may have. Give us a call today, we look forward to working with you!
You have questions, we have answers. Give us a call at 843-839-9870. We can recommend a trusted, local mortgage loan provider.
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