What's the difference between Pre-approval and Pre-qualification letter in New York City
real estate?
We will demystify this topic in the following video.
My name is Nick at Hauseit.
We are the largest Reduced Commission Platform for buyers and sellers here in New York City,
established in 2014.
So, let's get started.
So many first time homebuyers in New York City are quite confused about the difference
between a pre-approval and a pre-qualification letter.
There's a certain understanding in the marketplace that one of them is more intense than the
other as it relates to the implications for a credit pull on your credit score.
More specifically, the general understanding is that a pre-approval requires a hard credit
pull whereas a pre-qualification is nothing more than a soft credit pull.
So, naturally many buyers are somewhat hesitant to pull the trigger on a full blown pre-approval
given the implication that it may lower their credit score.
And the truth is, for some listings in the city you might be able to get away simply
by submitting a pre-qualification letter with your offer as opposed to a full blown pre-approval.
If you're buying a condominium the chances of this being okay, submitting a pre-qualification
letter are the highest.
However, if you're buying a co-op apartment it's highly unlikely that the listing agent
and the seller will agree to negotiate with you in good faith and accept your offer unless
you present them with a proper full blown pre-approval letter.
Therefore, we do suggest if you're a serious buyer and you're thinking of purchasing a
property withing the next few months to actually move forward with the pre-approval process
in New York City real estate hot properties can go quickly.
So, if you fall in love with the place and you haven't gone through the endeavor of the
pre-approval which can take a few days.
You might actually lose out on a property simply because you're not prepared.
Moreover, a pull in your credit is very healthy and in fact its generally a good thing to
have a hard pull from time to time.
Furthermore, when you pull your credit multiple times within a 45 day period, its generally
considered to be just one pull for the purposes of your credit score.
And so what this means, essentially, is that you can actually get a pre-approval letter
with multiple lenders and no, it should not count as multiple hard credit pulls.
So, the implication there is that it won't harm your credit score as much as you may
think.
The other consideration about a pre-approval vs. a pre-qualification letter in New York
City is specifically the fact that you don't actually have to use the bank who gives you
the pre-approval letter.
The pre-approval letter itself serves really only one purpose, well, aside from the fact
that it tells you what you can afford, it gives the seller and the listing agent the
confidence the need to view you as being a credit worthy and financially qualified buyer.
So, you can submit an offer with a pre-approval letter say from Chase bank but once you have
an accepted offer and you sign a contract and it comes time to apply for a financing
there is no requirement or obligation for you to proceed with Chase who gave you that
original pre-approval letter.
Instead, this is the perfect time for you to shop around, reach out to multiples banks
and going back to what we mentioned about hard credit pulls during a 45 day period all
being put together and counted as one pull.
Its therefore not super detrimental to your credit score for you to have conversations
with a few banks so you can figure out the best rate and figure out which mortgage banker
or broker you really get along with and who you think might help you move forward with
the deal in the most efficient and enjoyable manner.
One final note about pre-approval letters, as we mentioned you can change banks after
you have an accepted offer and before you apply for financing.
Therefore, its probably a good idea to request a pre-approval letter from a nationally recognized
lender.
And the reason being is during the course of a negotiation you want the seller and the
listing agent to have the utmost confidence in your financial qualifications.
And certainly presenting a pre-approval letter from someone like Wells Fargo or Bank of America
will really get that message across.
Conversely, if you have a pre-approval letter from a smaller lender while they may be a
great bank and there might be nothing wrong with them, its natural and inevitable that
some sellers and listing agents might not be familiar with them.
So you don't want to detract from the overall appeal of your offer simply because the lender
who's giving you the pre-approval letter isn't a household name.
Now, of course if you get the pre-approval letter from a larger bank you certainly can
proceed and apply for that other lender of your choice.
This would be done after the contract is signed and the deal is negotiated so there's really
no implication that it may harm you during the course of ta negotiation.
We hope you found this video helpful.
I'm Nick at Hauseit.
Let us know if you're looking to buy in the city.
We can help you save up to 2% on your purchase through a Hauseit Buyer Closing Credit.
Check us out http://www.hauseit.com and if you like this video please like, subscribe,
leave us a comment and we'll get back to you as quickly as possible.