As you look into buying a house, you may hear the terms preapproval and prequalification. Here’s a brief explanation of those terms:
Prequalification is a rough calculation of the mortgage payment you can afford. Your Coosa Valley Credit Union lender can help you with this. Why is it helpful? It lets you know from the start how much home you can afford so you don’t waste your time, or a real estate agent’s, shopping in the wrong price ranges. It also makes it possible for you to move quickly when you find the perfect house.
Preapproval means you’re essentially good to go. You formally apply for a mortgage and pay an application fee. The lender determines that you are eligible for a mortgage of a certain amount. So why is it called preapproval, rather than approval? That’s because, before making a final commitment to you, the lender must verify your employment and salary information, and see a professional appraisal of the house you select to be sure its value is at least equal to the selling price.
Bear in mind that the lender can calculate how much you qualify for, but that is not necessarily what you can afford. Are you counting on overtime income or two full-time paychecks to make your house payments? Are you expecting to be “house poor” for a few years while your income grows into a house payment? Talk with us to help you figure this out.
