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Why Get Pre-Approved before you start shopping?

1. Being pre-approved helps you know how much house you can afford. In other words, how much loan you’re qualified for, helps you stay within your target range.
2. Inventory is low especially in California's market, the highly desirable locations ( especially, with good schools and good neighborhood). In order be compete for the house you want, buyers need to be ready to present a strong offer! 
3. Knowing your debt-to-income ratio in advance helps you eliminate excess debt, you can pay off credit card bills or other loans and prepare for a better credit score, thus helps you qualify for more loan.

4. It is the industry's standard and expected nowadays for buyers to submit an offer with a pre-approved letter and
listing agents require the pre-approval or pre-qualification letter in order to even consider the offer.

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What is the difference between Pre-qualification, Pre-approval and Underwritten Pre-approval?

The difference between a pre-qualification and pre-approval
is that, with a pre-approval, income and asset documents have been provided and reviewed by a lender. Pre-qualification is the most surface-level document your lender can give you. The bank has not been provided with any official documents to verify income or assets. Today's industry standard require buyers obtaining loans to submit an offer with a pre-approval in hand, as most listing agents require one to even consider the offer. 

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Most buyers’ hesitation in getting pre-approval because they are concerned having an inquiry on their credit report could affect their credit score. However, a mortgage inquiry doesn’t have the same impact on your credit score as a credit card or auto loan. In fact, in most cases the scores aren’t affected at all. You can have multiple mortgage inquiries within a 30-day period ( check with your lender) and not take a score hit.
I always advise people to shop around at least 2-3 lenders from different banks or mortgage companies, since a loan is so much more than the interest rate and points.

 

The ultimate financing guarantees

A fully underwritten mortgage pre-approval is the third and highest tier of security in a financed offer.
If a bank has gone through the process of underwriting the loan, it basically means the loan amount is guaranteed, based on income, assets, and credit.
 Consequently, these buyers have the green light to purchase the home they desire.
A fully underwritten pre-approval also allows you to close much faster, since 90% of the work has already been completed by the bank. A savvy buyer's agent will position
this type of financing exactly the same as a cash offer; since the money is guaranteed, the playing field is leveled. The underwriting process takes time upfront—anywhere from a few days to a few weeks, depending on the complexity of a buyer’s financial position. But it gives a buyer an incredibly strong negotiating position, especially in a hyper
competitive market.

 

source credit: Tim McMullen

Copyright © 2025 Lisa Tan Realtor®

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