Do first time home buyers really need a credit approval? A credit approval is so much more than a prequalification or even a preapproval. It puts first time home buyers in a much stronger position, as it verifies for the seller that you can get a loan, and also close in a timely fashion.
Why isn’t a prequalification good enough? A prequalification can be issued after a quick phone conversation. So it doesn’t give the seller any assurance that you can get a loan, as the loan officer hasn’t actually reviewed any of your documentation.
What about a preapproval? Preapprovals USED to be adequate for first time home buyers. This is when you submit all your income documentation to your loan officer for their review. In this case they aren’t getting approval from underwriting, they’re just assuming underwriting should be ok with everything they’ve already reviewed. Now a days preapprovals may not be enough.
So how is a credit approval different? With a credit approval, the loan officer collects all your documentation, and then submits it to underwriting for a FULL approval. This makes the seller confident that you can obtain the loan, and it also makes it so you can close the loan quicker since half the work has already been done. Sellers usually like to receive their money ASAP!
But that sounds like a lot more work for me! A full credit approval may be more work up front, but it’s work you’re eventually going to have to do anyways. It also doesn’t cost you anything! So if you can do something for FREE that puts you in a stronger position, why not do it?!?
Don’t make the biggest financial decision of your life without getting educated! If you’d like more information about the credit approval process or the home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE workshops.