Article

Pre-Qualification Versus Pre-Approval

Posted by Jessica Andress on Aug 25, 2016 05:00:00 AM

Topic: ALL

Husband and wife filling out pre-approval paperwork

Are you beginning to think about purchasing a home, but are unsure where to start? Before investing the time and energy shopping for the home of your dreams, a great first step is to get your financing in order. Speaking with a lender to get pre-qualified or pre-approved can help make your home search more productive. What’s the difference between pre-qualified and pre-approved, you ask? The truth is the two terms appear to be synonymous, but surprisingly are not. We’ve highlighted some of the differences below:

Pre-Qualification

Pre-qualification is usually the initial step in the home buying process. It typically only requires completing an online application or having a phone call or in-person meeting with a lender to discuss your financial life—from your income and employment to your debts and assets. During this discussion, your Loan Officer will also do some preliminary estimates of the total amount of money you are qualified to borrow, give you some information on the types of loans that meet your needs, and what your monthly payment is likely to be.

Getting pre-qualified is a fast and free way to get an idea of how much of a loan the lender believes you can take on so you’ll be able to look at homes in your price range.

Pre-Approval

Pre-approval is a more involved process than pre-qualification. It enables the lender to get a more detailed picture of your income, credit history, assets, and liabilities in order to assess your ability to take on a mortgage.

Pre-approvals are of greater value to home buyers because lenders use your information in a systematic way to provide an accurate estimate of how much money you can borrow. By completing a mortgage application and providing the necessary documentation, your Loan Officer can determine the maximum amount you can borrow for your financial circumstances. Once you’re pre-approved, you’ll receive a letter for use with your realtor and any home seller that verifies you’re approved to buy and the mortgage amount for which you’ve been approved.

To aid in a smooth pre-approval process, gather all required identification, financial, and employment documents. Our mortgage application checklist includes commonly requested documents.

Having your pre-approval letter in hand when you come across the home of your dreams will give you the confidence to make an offer. You’ll know exactly where you stand financially and what you are comfortable spending. Then, once your offer is accepted, all you need is an acceptable appraisal and your lender may be able to give you loan commitment.

Learn more by speaking with a Loan Officer near you