With a real pre-approval, the buyer is the next-best-thing to being a “cash buyer” because the seller can rest assured that the buyer will qualify for a loan.
A truly “all-cash buyer” does not have to worry about lender approvals, but will typically still be concerned with a property appraisal and an acceptable title report.
Being pre-approved for a loan puts a buyer in a better position with the seller of the property. It allows the buyer to understand the costs associated with the purchase as well as the monthly costs associated with the ongoing ownership.
The Pre-Approval Process
The pre-approval process simply means that a buyer is getting approved for a loan prior to reaching an agreement with a seller of a property. The buyer will provide the lender with current income, asset and credit documents and the lender will determine the loan amount for which the buyer will be able to borrower.
The pre-approval process can take anywhere from 2 – 30 days, depending on the variables surrounding the possible transaction (credit worthiness, location of assets, calculation of income, etc).
Once a loan amount and purchase price have been determined by the lender, the final approval will usually be subject to an acceptable purchase contract, property appraisal, title report and final interest rates.
While it will vary from borrower to borrower based in the individual characteristics, a lender will typically be able to pre-approve a buyer within 5 days of receiving all of the applicable income, asset and credit documents.