Imagine the indignity of finding your dream home, having your offer accepted by an eager seller, and then having the lender say, "No!" You end up upset and embarrassed. The seller gets angry that you tied up his home. Worst of all, you may lose the contract.
You can avoid all this by getting pre-approved for a mortgage. It's even more important to seek pre-approval if your credit history is bad.
Pre-qualification
To pre-qualify for a bad credit loan, you'll need to provide information about your income, your total debt, and your assets. The lender will then review those numbers and estimate the amount of the loan for which you would qualify. The lender, however, is not obligated to lend you the money until the information that you provide is verified.
Although pre-qualification is free and can give you an idea of how much you can afford to spend on a house, pre-approval gives you a financial foundation, much like your house's foundation.
Pre-approval
Before a lender will pre-approve you for a bad credit loan, your credit and income information must be verified. A small fee is usually charged for this service, and once you're approved, you'll receive a letter that states the loan amount and the length of time that the offer will remain open.
This can be a persuasive piece of information to a seller, who won't have to worry about whether you'll be approved for financing and if you're able to complete a deal. Pre-approval can also speed up a closing because the lender has already done a lot of the legwork needed for the final loan commitment.
If you're looking for a bad credit mortgage, taking the time to get pre-approval can both save you the worry and embarrassment of being turned down for a mortgage, and get you into your new home much faster.
By Jan Lindsey
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