Pre-Qualification vs Pre-Approval
You might have an idea of the monthly loan payments you can afford, but sometimes the bank will feel otherwise. It’s always best to get pre-approved for a mortgage so you can determine what price range you can consider before you start your home search.
What is the difference between PRE-QUALIFICATION and PRE-APPROVAL?
Pre-qualification by a mortgage officer is a simple procedure by which you get an opinion as to how much you can qualify for and can discover any obvious obstacles that might cause problems. You will find out how much home you can afford. Keep in mind, this amount is based off of information that you provide and has not been verified.
Pre-approval goes a step further by underwriting your loan. You are providing documentation of income and liabilities.
Why get pre-approved for a home loan?
There are several reasons for you to get pre-approved for a loan:
- You will impress the seller! If the seller has two offers – one with a pre-approval letter and one with a pre-qualification letter – it will speak volumes on your behalf to be pre-approved and could even result in the seller working with you. It is that big a deal!
- You’ll have to make a loan application soon after putting a contract on a property, so pre-approval is putting you one step ahead in that process.
- You also save time by only looking at the homes that you can afford.
- You won’t be disappointed by choosing a home and finding out later that a bank won’t finance your decision.
- You will have a pre-approval letter from the lender that will make your offer on a property stronger since it shows you have the ability to go through with a purchase.