Pre-Qualification vs. Pre-Approval: What’s the Difference?

When it comes to the home-buying process, a key part of the equation is being ready. That means making sure you can demonstrate to a seller your ability to pay for the home in which you’re looking to make an offer, and having some up-front documentation from a lender.

A prequalification letter gives future home buyers an opinion of the range of the amount they may be able to borrow to buy a home. It is based on non-verified information provided by the applicant and does not include a credit report inquiry.

A preapproval gives future home buyers an estimate of the amount they may be able to borrow to buy a home, based on an initial review of financial information provided by the customer and credit report information.

Since a prequalification is not based on verified information, it only takes about 5-10 minutes. A preapproval will take approximately 20-30 minutes on average to interview the customer, enter their information into the origination system, pull a credit report and receive a preliminary credit decision.

A preapproval letter should be updated if the customer’s offer exceeds the estimated maximum loan amount. If the purchase price/loan amount needed by the customer is lower than the preapproval letter, a new preapproval is not required. A new preapproval for a larger amount may be generated at the customer’s request, and a higher credit amount authorized if the customer qualifies for the new amount.

When consumers are qualified for each new home pricing scenario, it is common for a future home buyer to ask for multiple preapproval letters for a variety of loan choices. A higher preapproval amount is subject to additional review to ensure the customer qualifies for the new amount.

Some other things to keep in mind:

  • A preapproval letter will give assurance to sellers that you will likely be able to secure a mortgage based on your credit report, but it is not a guarantee you will be approved. That approval process takes place when, after your offer has been accepted, that the mortgage underwriters approve your loan.
  • A prequalification letter can be helpful to buyers who are looking to understand the price range they should concentrate on during the home search, but is not the best option to accompany an actual bid.
  • In addition to having your credit scores pulled, the lender will base their preapproval letter based on W-2 forms, a current pay stub, a summary of your assets and your total monthly expenses. If you already own a home, you would also need to provide the mortgage statement and a copy of your homeowner’s insurance policy.

To summarize: A preapproval letter is much more serious than a prequalification letter. It shows you are ready and qualified to buy a home at a certain price point. It’s what you want in your hands if you are home shopping and need to move quickly.

How to Get the Best Mortgage Rate: 5 Basic Steps

Want to know how to get the best mortgage rate? Interested in buying a home? Unless you’re a military veteran, you better start saving for that down payment! In addition to saving, you’ll want to prove yourself a highly qualified buyer so that you can get the best mortgage rate possible.

This is extremely important because the terms of your mortgage can make a big difference in how much you pay to borrow the same amount of money.

Improve Your Creditworthiness.

According to Bankrate, the best mortgage rates are available to borrowers who have credit scores of 760 or above. Nowhere near that number? Don’t panic. You can improve your credit score by paying down or paying off loans, paying past-due collection accounts, and cleaning up any errors you discover on your credit report as they can — and do — occur. In fact, 25 percent of credit reports contain errors that are serious enough to result in being denied credit altogether. You can see where you stand by getting a free copy of your credit report.

Lower Your Debt
Paying your bills on time and paying down your credit card balance can reduce your debt-to-income ratio, or DTI, which improves your chances of qualifying for a low mortgage rate. Make sure your debt-to-income ratio, which compares the amount of money that you earn with the amount of money that you owe creditors, is no more than 36 percent. Anything below 36 percent is considered “good.” If you’re in the 37- to 43 percent range, many lenders will still give you a loan, but if you’re above 43 percent, it may be time to reevaluate how you’re spending your money.

Find Steady Employment
Mortgage lenders prefer candidates who can prove steady employment for several years. Ideally, you have been on the same job for at least two years or have made a job change and moved into an even higher-paying position. If your income is spotty (For example, if you’ve got long periods of unemployment or up against a pattern of declining income) that’s going to be problematic. And if you’re self-employed, you should know that there are many hoops to jump through.

Have Ample Cash Reserves on Hand
How much liquid cash will you have after closing to cover your new mortgage payment? The standard requirement for cash reserves on a mortgage is two months. This money should be saved in savings or checking accounts, certificates of deposits, or money market funds.

Shop Around

Shopping around for a home loan or mortgage will help you get the best financing deal. A mortgage is a product, just like a car, so the price and terms may be negotiable. Shopping, comparing, and negotiating may save you thousands of dollars.

Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry. This is because other creditors realize that you are only going to buy one home. The impact on your credit is the same no matter how many lenders you consult, as long as the last credit check is within 45 days of the first credit check. More information is available at Consumer Finance Protection Bureau.

3 Reasons Why Your Offer Could Get Rejected

Houston’s bay area is a hyper-competitive real estate market. With more demand than supply, well-priced properties are getting snapped up within days of getting dropped onto the market. Buying a home in the area doesn’t just start and stop with finding a property you like. Once you’ve found the property that suits your needs, your offer still needs to be accepted. Therefore, patience will be your greatest friend. Let’s discuss some of the reasons your offer could get rejected.

You’re Being Outbid
So you’ve found the property you just can’t be without. You and your agent discuss the strategy to move forward. Your agent submits an offer. A day later, the listing agent tells your agent that the property has received multiple offers. This is where you and your agent need to be tactical about how to proceed with an offer. On the one hand, you don’t want to lose out on the property, and on the other hand, you don’t want to grossly overpay because you have a fear of missing out.

You and your agent find a number that makes sense based on neighborhood comps, and maybe throw in a slight premium to give you the best chance of getting the property. However, that slight premium that you threw in might not be enough! After submitting the revised offer, your agent hears back that you were outbid. Don’t let losing out eat you up — it happens. Ultimately, someone bid significantly above comps to get this property. Do you want to buy a property at the top of the market, or do you prefer being strategic about the price point you get in on?

You’re Financing and Others Are Offering All Cash
Cash is king. Leverage and credit are the American way, but cash still rules everything around us. The same thing holds true for real estate sales. You may have provided a higher offer, but because of the amount of time involved in financing a deal, a seller would generally be much more inclined to take an all-cash offer at a lower price. There is simply much more risk involved with financing. Will you get the mortgage? Will the property appraise? Low appraisals do happen, and there is something you can do if your appraisal comes back lower than the contract price.

Your offer is going to be contingent on financing, which means that if for any reason you can’t get financing, you can back out of the deal. For an all-cash buyer, there are no financing contingencies, because they don’t require appraisals or a review from underwriting.

Your Starting Offer Is Way Too Low
Getting an offer accepted at first pass, particularly when you’re bidding under the asking price, does not happen very often. The caveat is that when you’re an all-cash buyer, you may have sellers bending over backward for you because losing out on you is a risk they may not want to take. An offer is often a conversation starter. It gets the dialogue started and begins the back and forth between parties over price and other contingencies.

However, if your offer comes in significantly under ask, it may function as more of an insult than an opener to dialogue. Don’t expect sellers to negotiate themselves down if your offer is so low that it may not be deemed serious. Your offer will get flat-out rejected with no counteroffer provided.

The Appraisal Process Explained

When a seller has accepted a buyer’s offer the buyer’s lender will send out an appraiser to make sure the purchase price is in line with the property’s value.

Appraisals help guide mortgage terms.
The appraised value of a home is an important factor in the loan underwriting process. Although lenders may use the sale price to determine the amount of the mortgage they will offer, they generally only do so when the property is sold for less than the appraisal amount. Also, the loan-to-value ratio is based on the appraised value and helps lenders figure out how much money may be borrowed to purchase the property and under what terms. If the LTV is high, the lender is more likely to require the borrower to purchase private mortgage insurance.

The appraised value is not a concrete number.
Appraisals provide a professional opinion of value, but they aren’t an exact science. Appraisals may differ quite a bit depending on when they’re done and who’s doing them. Changes in market conditions also can dramatically alter appraised value.

Appraised value doesn’t represent the whole picture of home prices.
There are special considerations that appraised value doesn’t take into account, such as the need to sell rapidly.

Appraisers use data from the recent past.
Appraisals are often considered somewhat backward-looking, because they use sold data from comparable properties(often nicknamed “comps”) to help come up with a reasonable price.

There are uses for appraised value outside of the purchase process.
For selling purposes, appraisals are usually used to determine market value or factor into the pricing equation. But other appraisals are used to determine insurance value, replacement value, and assessed value for property tax purposes.

How To Add Curb Appeal

The first impression a buyer gets when seeing your home in person is all about the curb appeal. Don’t send them running away!

  • Trim bushes and branches so they don’t block windows or architectural details.
  • Set a pot of bright flowers (or a small evergreen in winter) on your porch or front walkway.
  • Install new, matching locks and knobs on your front door.
  • Repair any cracks or holes in the driveway, and clean oil spots with degreaser and a steel brush.
  • Edge the grass around walkways and trees.
  • Stow your garden tools and hoses out of sight, and clear kids’ toys from the lawn.
  • Buy a new mailbox.
  • Upgrade your outdoor lighting.
  • Purchase a new doormat for outside your front door.
  • Clean your windows, inside and out.
  • Polish or replace your house numbers.
  • Mow your lawn. Also, turning on the sprinklers for 30 minutes before the showing will make the whole yard sparkle.
  • Place a seasonal wreath on your door.

How To Attract More Buyers

These tips will help you convince buyers your property offers top value for their dollar.

Amp up curb appeal.
Look at your home objectively from the street. Check the condition of the landscaping, paint, roof, shutters, front door, knocker, windows, and house number. Observe how your window treatments look from the outside. Something special‒such as big flowerpots or an antique bench‒can help your property stand out after a long day of househunting.

Enrich with color.
Paint is cheap, but it can make a big impression. The shade doesn’t have to be white or beige but stay away from jarring pinks, oranges, and purples. Soft yellows and pale greens say “welcome,” leading the eye from room to room and flatter skin tones. Tint ceilings in a lighter shade.

Upgrade the kitchen and bathrooms.
These are make-or-break rooms. Make sure they’re squeaky clean and clutter-free and update the pulls, sinks, and faucets. In a kitchen, add one cool appliance, such as an espresso maker.

Add old-world patina to walls.
Crown molding that’s at least six to nine inches deep and proportional to the room’s size can add great detail on a budget. For ceilings, nine feet high or higher, consider dentil detailing, which is comprised of small, tooth-shaped blocks in repeating ornamentation.

Screen hardwood floors.
Refinishing is costly, messy, and time-consuming, so consider screening instead. This entails a light sanding‒not a full stripping of color or polyurethane‒then a coat of finish.

Clean out and organize closets.
Remove anything you don’t need or haven’t worn in a while. Closets should only be half-full so buyers can visualize fitting their stuff in.

Update window treatments.
Buyers want light and views, not dated, heavy drapes. To diffuse light and add privacy, consider energy-efficient shades and blinds.

Hire a home inspector.
Do a preemptive strike to find and fix problems before you sell your home. Then you can show receipts to buyers, demonstrating your detailed care for their future home.

How To Prepare For The Property Photoshoot

With the majority of buyers shopping for homes online, high-resolution slide shows and video tours are a must. Heres how to make your home shine on camera.

Understand the camera’s perspective. The camera’s eye is different from the human eye. It magnifies clutter and poor furniture arrangement so that even a home that feels comfortable in person can look jumbled online.

Make it spotless. Cameras also tend to magnify grime. Don’t forget floor coverings and walls; a spot on a rug might be overlooked during a regular home showing, but it could become a focal point online.

Know what to leave. You want to avoid clutter, but try to have three items of varying heights on each surface. On an end table, you can place a tall lamp (high), a small plant (medium), and a book (low).

Snap practice pictures with your own camera. This will give you an idea of what the home will look like on camera before the photographer shows up. Examine the photos and make changes to improve each room’s appearance, such as opening blinds to let in natural light, removing magnets from the refrigerator, or taking down distracting art.

Pare down. Removing one or two pieces of furniture from each room, even if just for the shoot, can make your space appear larger on-screen.

Rearrange. Spotlight the flow of your space by creating a focal point on the furthest wall from the doorway and arranging the other pieces of furniture to make a triangle shape. The focal point may be a bed in a bedroom or a china cabinet in a dining room.

Accessorize. Include a healthy plant in every room; the camera loves greenery. Energize bland decor by placing a bright vase on a mantle or draping an afghan over a couch.

Keep the home in shape. Buyers who liked what they saw online expect to encounter the same home in person.

The Option Period – What Is It & Is It Needed?

The Option Period in Texas is a specified number of days set forth in a real estate contract which allows the buyer to terminate the contract for any reason. This option, when written into a real estate contract, creates the right to terminate the contract within a certain number of days for a specified price without risking the earnest money deposit. The Texas Real Estate Option Period:

  • Provides security for the buyer.
  • Has an agreed-upon number of days.
  • Starts at the beginning of the purchase contract period
  • Requires consideration – a non-refundable fee paid to the seller called the Option Fee.
  • The property will be placed in OP (option pending) status in the MLS.
  • Ends at 5 p.m. local time.
  • Can be extended by mutual agreement of the buyer and seller.


Provides security for the buyer.
If a buyer decides that he/she wants the Option Period written into a real estate contract, it is used solely to have the option to exercise the right to terminate the contract for any reason whatsoever without risking the earnest money deposit.

Has an agreed-upon number of days.
The number of days set forth for the option period is negotiable, but typically, anywhere between 1 and 10 days. During this time period, a home buyer will want to complete any desired home inspections (general, architectural, foundation, pest, etc.). If these inspections result in potential home repairs, the option period also provides time for repair estimates to be obtained and any additional contract negotiations (due to needed repairs) finalized. The buyer may decide to exercise their right to terminate if they are not satisfied with the condition of the property after receiving the report(s).

The Option Period starts at the beginning of the purchase contract period.
The option period begins the day after the effective date of the contract. For example, all parties execute the contract on June 2nd. The option period begins on June 3rd.

Requires consideration – a non-refundable fee paid to the seller called the Option Fee.

  • The Option Fee amount is negotiable.
  • The Option Fee is given (hand-delivered or mailed) to the seller (or seller’s agent) at the beginning of the contract period.
  • The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. For example, if the contract effective date is March 1, the option fee must be paid by 11:59 p.m. March 4.
  • The Option Fee may or may not be credited to the buyer’s costs at closing.
  • If the buyer chooses to terminate the contract during the option period, the seller has the right to keep the amount paid for the option period.


The property will be placed in OP (option pending) status in the MLS.
During the Option Period, the property will be removed from ‘Active” status and placed in “Option Pending” status in the MLS (Multiple Listing Service). This will prevent other potential buyers from viewing and making offers to purchase that home. The Option Fee is provided to the seller as consideration for taking the home off the market during this time.

Ends at 5 p.m. local time.
If a buyer wishes to terminate the contract during the Option Period, he/she must notify the seller by 5 p.m. local time (where the property is located) on the day that the Option Period ends.

Can be extended by mutual agreement of the buyer and seller.
For additional consideration, the Option Period may be extended by the buyer for an agreed-upon number of days. It is important that the additional fee obtained by the seller to extend the option period is more than a symbolic gesture. Extensive case law in Texas suggests that the buyer must offer something of value to the seller to ensure that the extension is legally enforceable. For example, a court may find that $1 does not satisfy legal requirements.

  • The Option Fee amount is negotiable.
  • The Option Fee is given (hand-delivered or mailed) to the seller (or seller’s agent) at the beginning of the contract period.
  • The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. For example, if the contract effective date is March 1, the option fee must be paid by 11:59 p.m. March 4.
  • The Option Fee may or may not be credited to the buyer’s costs at closing.
  • If the buyer chooses to terminate the contract during the option period, the seller has the right to keep the amount paid for the option period.


The property will be placed in OP (option pending) status in the MLS.
During the Option Period, the property will be removed from ‘Active” status and placed in “Option Pending” status in the MLS (Multiple Listing Service). This will prevent other potential buyers from viewing and making offers to purchase that home. The Option Fee is provided to the seller as consideration for taking the home off the market during this time.

Ends at 5 p.m. local time.
If a buyer wishes to terminate the contract during the Option Period, he/she must notify the seller by 5 p.m. local time (where the property is located) on the day that the Option Period ends.

Can be extended by mutual agreement of the buyer and seller.
For additional consideration, the Option Period may be extended by the buyer for an agreed-upon number of days. It is important that the additional fee obtained by the seller to extend the option period is more than a symbolic gesture. Extensive case law in Texas suggests that the buyer must offer something of value to the seller to ensure that the extension is legally enforceable. For example, a court may find that $1 does not satisfy legal requirements.

The #1 Mistake First-Time Homebuyers Make

I get it. I was once a first-time homebuyer, too. It’s an exciting time and you can not wait to dive in and start looking at houses. Weekends that you used to spend lounging you now anxiously await the chance to tour properties.

You spend countless hours looking at properties and have all of your favorites saved, starred, and bookmarked. You call a real estate agent ready to see all of those homes in person not realizing you are making the number one mistake first-time homebuyers make. When you find a house you love you plan to contact a mortgage lender.

The most common mistake first-time homebuyers make is touring properties before getting mortgage pre-approval. Trust me on this one. I can give countless examples of buyers falling in love with a home only to find out that they either can’t get approved for a mortgage based on credit scores or debt; or that they are approved but for far less than they thought.

When speaking with a real estate agent, if you do not already have mortgage approval, a great agent can refer you to a list of lenders. Which lender you decide to go with is up to you. Lenders offer different rates and terms so it is important to shop around for a mortgage.

Knowing how much you can afford is the foundation of the home buying process. Which properties you tour with your agent is driven by this. It is also the guide for making an offer. You may want to stay within a budget lower than the amount you are approved by your lender. Clear and open communication with your agent is key.

A great agent will listen to your restrictions and ensure that the properties you see fall in line with that number. Flood zones and a MUD tax can make a house that initially seems affordable end up being hundreds of dollars per month above your preferred range.

Do not start the home buying process alone. Even if your timeline is months in the future or even unknown, it’s never too early to get an experienced agent on your side. It costs buyers nothing to hire an agent and great agents have a team of experts ready to work for you. Whether you need referrals for lenders, inspectors, insurance agents, lawn care, housekeepers, and more, the home buying process is simplified with a trusted local agent.

5 Ugly Truths About The Home Buying Process

You’ve made the decision to purchase a home. The excitement of touring properties and finding the home that checks your boxes is thrilling but here are some ugly truths you may not know.

Your perfect home doesn’t exist. Yes, there are homes on the market that will have the right number of bedrooms and bathrooms sitting on the size lot you want, but it won’t be perfect. It may not have a layout you like. Or the bedrooms may not be the size you imagined. The kitchen might be too open – or not open enough – to the living room. The backyard may backup to a ditch. The reasons are endless as to why a home checks all the functional boxes but still isn’t perfect.

If you’re buying the home with someone else, there will be arguments. Put any two people together to make a singular decision and there will always be some level of disagreement. Sometimes it’s playful and other times it will cause tension. Know before you ever tour a property what you and the other person are willing to compromise on and what each of your deal-breakers.

The seller of the home you love will accept an offer before you even get to see the property. Homes hit the market every day but your schedule will limit what days and times you can view properties. While you’re marking that property as a favorite or texting your agent to schedule a showing, another buyer’s agent is submitting an offer to the seller.

The home doesn’t look the same in person as it does in the photos. Real estate photographers are experts in capturing the right angles and lighting to make a room look large, spacious, and bright. They also are masters at editing photos to make them eye-catching so buyers want to see the property in person. Just remember – rooms in the photos may be smaller than they appear. If you are unsure, ask your agent. He/she has access to the room dimension information.

Even after your offer is accepted, it’s not official until the transaction closes and you get the keys. Getting an offer accepted is only the beginning of the sale. You still have to get the property inspected. Your lender still has to get the property appraised. The title company still has to verify there are no issues or liens on the title. Your loan has to get final underwriting approval. Any of these critical steps could put the transaction at risk.

You’ve made the decision to purchase a home. The excitement of touring properties and finding the home that checks your boxes is thrilling but here are some ugly truths you may not know.