Thinking of purchasing a home? Know the difference between pre-qualifications and pre-approvals to make your process even easier.
Buying a home can be confusing. There are a lot of unfamiliar terms and applications to fill out. One topic that’s often difficult to understand is the difference between a mortgage pre-qualification and pre-approval.
See how they differ and learn how you can benefit from both.
A mortgage pre-qualification means a lender has reviewed your application to evaluate your financial history and determine if you’ll be eligible for a certain loan. Pre-qualifications are often close approximations to what you’ll qualify for if you submit a formal application that undergoes a more in-depth review.
At A+FCU, we do pull a credit report and base your pre-qualification on the information that appears on the report along with information provided on the application, but every lender is different.
Pre-qualifications can be beneficial if you’re planning on buying a house in the future and want to look at how lenders view your financial history. It can also help you start shopping around for a mortgage and give you a good idea of what you can afford and thus what to look for.
Once you’re ready to make an offer on a home, you’ll need a mortgage pre-approval. It will require verification of your income, assets, and debts, as well as a credit report. Once authorized, your pre-approval is good for 30-90 days depending on the lender.
A pre-approval can give you a competitive edge when purchasing a home. When submitting an offer on a house, you can let the seller know you have a pre-approval, meaning you have secured financing and will have the allotted amount.
Which One Do I Need?
Both can be beneficial depending on what you’re looking for, but ultimately a mortgage pre-approval will help you most when placing an offer on a home. While a pre-qualification tells you how much a lender is willing to loan you, a pre-approval backs your offer up and lets the seller know you’re a serious buyer.
Once you submit the application, we’ll send your pre-qualification letter and a mortgage expert will contact you to talk about your options as well as answer any questions you may have. Along with the pre-qualification letter, you’ll receive a list of required documents needed to get a pre-approval.