How Pre-Qualifying can help the VA Loan Process
Pre-qualifying is actually a really good idea. Unfortunately, it has a bad connotation because of all that spam you get from credit card companies saying you’re “pre-qualified” for a credit card. When it comes to mortgages, though, particularly a VA loan, it is really smart to pre-qualify. Why? We’ll talk about a lot of reasons and we’ll divide them into things that are general to just about any home mortgage and things that are specific to a VA loan.
General Reasons that Apply to All Home Mortgages
The first and probably most obvious reason to pre-qualify is because that’s the only way you can find out how large of a loan you’ll be approved for. You don’t want to waste time shopping for a $300k+ home when you won’t qualify for more than $275k. Pre-qualifying takes all the guesswork out of it, and it becomes less a question of trying really hard to qualify for a specific amount and more a question of finding a home that you can easily afford. That’s only the tip of the iceberg, however, pre-qualifying also greatly reduces the amount of time it takes to close on a loan, because a lot of the work has already been done. You can start the pre-qualifying process and house-hunt in the area you want to move even before you’ve been pre-qualified. Being pre-qualified also opens you up to purchase foreclosed homes for very competitive prices. Especially for homes that are in high-demand areas and in great condition, being pre-qualified is the only way you’ll have a chance of nabbing the property before someone else beats you to it. Banks are interested in closing on foreclosures as quickly as possible, and they are not interested in a long, drawn-out loan application process that might end in rejection because the borrower is not qualified for the loan amount.
Being pre-qualified can have the same effect on normal home sales as well. Often, home sellers are in a hurry to sell their home, whether because they don’t want to keep paying interest on a home they are moving out of or because they are relocating to pursue a career opportunity elsewhere, time is often of the essence, and your offer may be passed on in favor of a lower offer of someone who is pre-qualified because the seller knows A) the pre-qualified buyer is definitely eligible for the loan amount and B) they’ll be able to close a lot faster. Pre-qualifying on any mortgage is definitely a good idea.
All the reasons explained above are true across the board, but many of them are especially true of VA loans. For example, many home sellers are turned off by the Escape Clause, which allows borrowers to get out of a contract to purchase a home if the appraisal value comes in lower than the sale price of the home. While pre-qualifying does not cancel out the Escape Clause, it makes it less likely to become a problem, because the borrower has certified that they can afford the home they are looking at, which means they are much more likely to have enough money to make a sufficient down payment to bring the loan amount down to what the VA will guarantee even if the seller is not willing to drop the price of the home. Many sellers also avoid VA borrowers because of how long it can take to close on a VA loan. Being pre-qualified can mitigate that significantly, and open a lot of doors that may not otherwise be open.
Also, for a VA borrower, your relationship with your lender is very important, because VA-approved lenders have a certain amount of leeway to offer VA loans the way they see fit, and if you establish a relationship with a certain lender (or several lenders) by pre-qualifying with them, you get an in-depth opportunity to evaluate them and decide which lender you want to continue working with to actually get your loan. You can also see the differences in the amounts that each lender will pre-qualify you to borrower, which is a useful tool in comparing different VA lenders. Contact us today and we can help you begin the process.