LGBTQ+ Home Buyers – Pre-Qualification and Preapproval
Today, more LGBTQ+ couples are house shopping than ever before, with many making the decision to start a family too. These changes are welcome, though challenges remain, ranging from continuing discrimination to a lack of familiarity with the language and procedures of real estate transactions.
Let’s take a look at two similar sounding but very different terms used in the home buying process: prequalification and preapproval. A misunderstanding here can lead to big disappointments. The two terms are not interchangeable.
Pre-Qualification is a credit estimate given by a lender, based on information provided by you, the borrower. The important concept is that the “pre-qualification” is based on basic financial information you volunteer.
Using this information, the lender estimates how much house you can afford. As you might imagine, this process is not the same as, nor as rigorous as an official review of your credit score, bank statements, and other financial documents.
Preapproval (Verified Approval)
Preapproval is a more serious look at your finances and ability to pay for the range of house you’re looking at. Preapproval can take some time, so it’s wise to start the preapproval process early, even before you look at any homes.
For a preapproval, you gather and supply the same documentation you would when applying for a mortgage loan. Even so, pre-approval is not failsafe. For example, your credit score is subject to change, even during the time period when you’re looking at homes.
Be careful. Things like buying a new car, missing a payment on a credit card, going on a big vacation— one or all of these could affect your credit.
- Don’t open or close any new credit accounts
- Don’t pay off all your cards
- Don’t transfer balances between cards
The process of preapproval ends with a Verified Approval Letter (VAL), which you can present to both your real estate agent and the home seller as reliable proof that you can acquire a mortgage large enough to buy the home of your dreams.
Don’t Rock the Boat
It’s general practice among mortgage lenders to require proof of financial stability for a period of two years before your apply for a mortgage. This means a consistent job. It means not being involved in a lawsuit. Not cashing out your IRA. Avoiding any unnecessary financial risk.
In the absence of discrimination, with the fairest of lenders rooting for your success, the mortgage process is a fragile one. The only time to celebrate is when the closing is final and the keys are in your hands.
In the face of all obstacles, home ownership is an exciting step for any couple; it’s a putting down of roots, a commitment to the future, and for many, the investment of a lifetime.
In today’s market, it’s important to show the seller that you are both serious and prepared. Many homes are going over the asking price and the trend is not only toward record high prices, but also toward cash sales. That’s why you can’t afford to be anything less than well organized, prepared, and carefully preserving your credit score.
Find the Help You Need
You need professionals on your side, and one place to access the expertise you need is at the LGBTQ+ Real Estate Alliance.
The LGBTQ+ Real Estate Alliance, a 501(c)6 organization, was launched in June 2020 by leading members of the real estate industry. Influential real estate professionals and allies joined with other members of the LGBTQ+ community to create this new voice in real estate.
The mission of the Alliance is to Advocate, Elevate, and Celebrate. The Alliance advocates for fair housing for all and promotes LGBTQ+ homeownership. The Alliance elevate professionalism in the industry through education and networking. And they celebrate diversity and inclusion in our members and allied partners.
The Alliance’s website connects you with housing and real estate professionals, nationwide, from Real Estate Agents and Lenders to HUD Consultants and Tax Advisors.
First Time Homebuyer Guide
At the LGBTQ+ Real Estate Alliance, we’ve prepared a 40+ page guide, the “First-Time Homebuyer Guide.”
Our guide walks you through the steps, covering every aspect of the home buying process, addressing issues that are unique to our community. We hope you’ll choose to work with one of our members to buy your new home.
The First Time Homebuyer Guide includes a range of information, all the way from the research phase and finding a loan to the “Impact of Home Ownership on Your Long-Term Financial Security.”
From offer to closing, you’ll appreciate the resources we’ve compiled in our First-Time Homebuyer Guide.