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Pre-Qualified vs. Pre-Approved: Know the Difference or Lose Out

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Whether through play Simply view it on HGTV or browse the internet to find the best way to build wealth and find that real estate investment is the best option for you and your financial future.

Let me tell you, I think you are making a great decision.

Deals, Agents, Lenders-Oh my!

Imagine this scenario. It’s something most beginners experience, and yes, I experienced it myself.

You have accumulated hours by refining hours of research and knowledge Bigger Pockets Forum,read blog,listen Bigger Pockets PodcastAnd learned the strategies you want to implement to achieve Financial freedom (Or simply increase passive income).

You have chosen the perfect area with a hipster coffee shop and an active nightlife. There you can see young athletic couples running all day long.

You saved enough money for the down payment Analyzed dozens of properties using BP calculator.. You know “enough” to understand what a particular property produces on income / profit.

You feel confident and ready to buy your first investment property!

Related: 7 life-changing lessons you’ll want to know as a real estate beginner

After waiting weeks and looking for that perfect investment in MLS, a pop-up finally pops up and calls the agent.

“Hey, Bill! I found a property. Please check it out!”

A few hours later you met Bill at home, and this time your stomach is full of butterflies from the excitement that this might be one! You check it out, and everything looks good. You tell Bill the magical phrase that every new investor wants to say. “Let’s make an offer.”

Bill says. All I need is your pre-approved letter from your lender, and we submit our offer! “

You give Bill your frontQualifying A letter given to you by your mortgage lender. It should be “good enough” (I don’t see the difference).

You make an offer and, believe it or not, it’s accepted! But glory is short-lived.

You have no choice but to give up your property because your loan will fail. There is that deal.

Qualifying

Well, this is incredibly common, and it actually happened to me. As you can see, there is a big difference between “pre-certification” and “pre-approval”.

If you haven’t gone through the process of calling a mortgage lender yet, it will feel scary. But believe me, it’s not. Call a lender introduced or met on BiggerPockets.com (or via a local REIC). They ask you the following basic questions:

  • What is your credit score?
  • How much is your income?
  • Do you have ordinary debt?
  • How much is your bank account?
  • How much is the property you are looking at?
  • And some other questions that you should definitely be able to answer.

Based on your answers (all must be true and accurate), they give you a quote about what you are doing should do it You can receive it. They draft a letter based on the information evaluated, and this is known as your pre-qualified loan amount.

This may seem great, but it’s a big step for beginners, but all that it really says is, “This doesn’t really mean anything and keeps you interested. It’s just a number for the purpose. I’m working with us. “

Pre-approved

This is really important. Please do not bother to send a qualified letter in advance.If you are serious and ready to make an offer that you can accept to sign a contract, you need to prepare in advanceApproved..

What is the difference? The pre-approval letter states that it is a formal quote from the lender and will lend the amount of “X” to the real estate, but “pre-qualification” is probably Lend out the amount of “X” If Everything you say is checked and certified.

Once pre-approved, they perform a credit check (which is definitely a shock if you are using credit karma to check your credit score).

Cash on cash return real estate

All the lenders I talked to told me that when you know what it really is, you can expect a 20-50 point drop in your credit karma report. And yes, this happened to me.

In addition, a two-year tax return is required. This can be avoided a bit if you have a lender who is willing to do some extra work.

In addition to credit checks and tax returns, they require:

  • Income proof
  • Bank statement
  • A copy of your ID
  • If you have just graduated from college, you probably have a transcript for your student
  • And some other items specified by your lender

The whole process takes a day or two, but if you’re ready to invest, it’s a step you have to take. Especially in hot markets like Denver, Colorado, it will be pre-removed if not pre-approved. (That was good, isn’t it?)

Progress, progress, progress

When it comes to starting as a novice investor, the road is long and filled with lessons, mistakes, knowledge and rewards everywhere.

The only real mistake you can make is to take no action. To be honest, I learned much more just by doing it, just as I learned from Bigger Pockets.

Each phase brings a new obstacle, and each obstacle retains new knowledge and experience. It’s never the end, it’s always rewarding (unless you make the same mistakes). Keep taking action and keep moving forward.

“The distance between your dreams and reality is called action.”-I don’t know

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What steps have you taken in the last few weeks to close your first deal? What obstacles did you encounter? And what did you learn?

Tell us your experience in the comments!

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