Find out why you should get pre-qualified for a home loan. When searching for South Bay homes and South Bay realtors, one of the most crucial steps, knowing your borrowing power and what you can afford, is overlooked. Find real estate listings with our free home search and South Bay MLS access, open houses, Realtors®, and our listings. Our free real estate services feature all South Bay cities and neighborhoods including Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance, El Segundo, Hollywood Riviera, Hawthorne, Hollyglen, and Palos Verdes.
 
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Why Would you get Pre-Qualified for a Home Loan?

Buying a Home?
Know Your Borrowing Power
When shopping for a home in the South Bay you can save yourself a lot of 
time, energy, and disappointments by taking time to find out how much 
borrowing power you have. With that knowledge you can focus your search on 
homes you can afford. In addition, if you get lender confirmation of your purchase 
power you can negotiate with increased leverage and confidence. Thus, a smart 
move on your part is to determine your financial qualifications for a loan before 
you even begin to look at homes. How can you do that? Get pre-qualified and/or 
pre-approved.
Get pre-qualified
         
This process will give you a general idea of what you can afford. It is an 
estimate based on a surface review of your income and debt. You can
pre-qualify yourself or you can have either a real estate agent or mortgage
lender handle this for you. If you choose to pre-qualify yourself, you can 
use one of the many online mortgage calculators designed for this purpose. 
Most mortgage lenders have these calculators available on their web site. 
When lenders pre-qualify you they ask questions about your income, total 
debt, monthly payment obligations, current employment, payment history, 
and any negative factors such as bankruptcies. Generally, they do not 
perform an analysis of your credit report. They rely on you to provide accurate 
financial information. There is typically no cost for a pre-qualification 
analysis nor is there a commitment by either you or the lender with 
respect to a future loan.
Get pre-approved.
         
The pre-approval process is more detailed and thorough than pre-qualification. 
You will be asked to complete a mortgage application, and some lenders charge 
an application fee. The lender verifies all of the information on your application 
and reviews your credit report. If you qualify, you will receive a written 
commitment – a pre-approval letter – for a loan up to a specified amount subject 
to certain terms and conditions. This commitment is still not a guarantee that 
your loan will be approved when you do settle on a home to purchase. Your loan 
commitment is finalized after information about the property, including an 
appraisal, is submitted and approved.
Even though pre-approval is not a loan commitment, it offers a number of 
advantages during the home buying process. You know the maximum amount you 
can spend so you don’t waste time looking at homes that are beyond your price 
range. You are also more attractive to sellers because you already have financing 
squared away. This is really to your benefit in a sellers’ market in which the home 
of your dreams might have multiple competing offers.  In any market, pre-approval 
strengthens your negotiating position because you come to the table with the 
money to back your offer.
Pre-approval can be particularly helpful for first-time buyers as well as self-
employedpersons or those paid on commission. If you are a first-time buyer in 
competitionwith similar buyers who have already demonstrated their ability to meet 
a monthly mortgage payment, you may find your offer in a weaker position in the 
eyes of a seller. Sellers may also have doubts about your ability to get financing. 
Self-employed buyers or those working on commission sometimes do not have 
the financial documentation or “paper trail” of salaried persons. Some sellers see 
this as a red flag. A pre-approval letter in either of these circumstances helps 
because it demonstrates that a lender has already considered your financial 
situation and is ready to proceed with the loan.
Regardless of the approach you take, ask your mortgage lender to clearly explain 
what is involved in each process and any fees, commitments, terms, and 
conditions that apply. Then let the search for your ideal home begin.
 
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