Loan Pre-Qualification vs. Loan Pre-Approval
When it comes to buying land or a home with more acreage, the process can be a little more cumbersome than usual. Because the market is smaller and the prices are higher, sometimes real estate agents will require a loan pre-qualification before showing a property.
We get a lot of inquiries from those looking to buy properties with acreage about loan pre-qualifications and land loan pre-approvals - let us help you understand the differences between the two.
WHAT IS A LOAN PRE-QUALIFICATION?
A loan pre-qualification is a letter stating that you simply qualify as a loan applicant for an estimated amount and the individual property you’re inquiring about. In order to pre-qualify you for a rural property, we’ll request your name, address of the property and the property type. It is important to note that your credit will not be run, so the qualification for a loan amount doesn’t signify approval.
WHEN DO I NEED A LOAN PRE-QUALIFICATION LETTER?
A good time to request a loan pre-qualification is at the beginning of the buying process, when you're actively looking at properties and potentially ready to make an offer. During this time, you’ll discuss land ownership goals and any other potential financing needs with your loan officer. If your real estate agent is requesting a loan pre-qualification letter to view a specific property, it’s best if you know in advance, as these letters can take anywhere from one to three days to develop.
WHAT IS A LOAN PRE-APPROVAL?
A loan pre-approval is a more in depth and accurate indication of funding availability for a certain property. In order to get a loan pre-approval for a rural property, you’ll need to submit the same information needed for a loan application. This could include:
- Up to three years of tax returns
- A balance sheet or financial statements (assets, liabilities, including current loans, payment history, etc.)
- A copy of your driver’s license.
- Last 60 days of paystubs
- Copies of bank and account statements
If you’re ready to proceed with the purchase, you’ll also need to provide a signed sales contract.
WHAT IS THE MAIN DIFFERENCE BETWEEN A PRE-APPROVAL AND A PRE-QUALIFICATION?
The main difference between a loan pre-approval and a loan pre-qualification is that a loan pre-approval will receive full analysis and outline the loan amount you could be approved up to, based on the purchase you are looking to make.
WHEN DO I NEED A PRE-APPROVAL FOR A LOAN?
A pre-approval for a land loan or mortgage loan will be needed if you’re looking to move quickly on a specific property or to make a serious offer.
In rural America, no two properties are identical, and those classified as agricultural will be a little different from your run of the mill mortgage. A pre-approval for an agricultural land loan will be applicable to that individual property and no others. The loan pre-approval will translate into the loan application if you decide to move forward with purchasing the property. Please keep in mind that you may need to submit updated information if there has been a significant amount of time that has gone by between receiving the loan pre-approval and the acceptance of your offer.
Buying rural property can be confusing and overwhelming, but following through and owning your own piece of land makes the process worth it. We specialize in financing agriculture and rural America, so we’re ready to help you navigate this process with ease.
If you have a property in mind that you’re ready to call your own, give us a call today to speak with a loan specialist and request your loan pre-qualification or pre-approval.