Happy Spring everyone!! This is the fourth installment of twelve monthly blogs on financial information useful to buying or selling a home. This month’s Financial Corner topic is “Getting Pre-Qualified versus Getting Pre-Approved for a Mortgage”. Hope it provides you with useful information.
Pre-qualification versus Pre-approval
Often buyers mistake pre-qualification for a home loan with pre-approval for a home loan. There’s a difference between these two terms. Pre-qualification. Getting prequalified is the initial step in the mortgage process and it’s pretty simple. You provide your lender with your overall financial picture, sometimes verbally, including your debt, income and assets. The lender will then provide you with an approximate amount of mortgage for which you qualify. It doesn’t include an analysis of your credit report or an in-depth picture of your ability to purchase a home. The mortgage lender can provide you various mortgage options and recommend what is best for your situation. Because it’s based on only information you provide to the lender it’s not a sure thing, it’s what you might
expect to be approved for.
Pre-approval. Getting pre approved is much more involved. You will complete an official mortgage application and may pay an application fee. You will then provide the lender with documentation to perform an extensive financial background check including pulling a credit report. You will also know what interest rate you will be charged on the loan. With pre approval, you will receive a conditional commitment, in writing, for a specific amount which gives you an advantage when dealing with a potential seller. It allows you to move quickly when you find a home to purchase. When you make an offer, it won’t be contingent on financing which is a plus in a competitive market.
So, should you skip pre qualification and go right to pre approval? If you are serious about buying a home, you won’t waste time going right to pre approval and you will know for sure what you can or can’t buy.