Buying a home can be confusing. There are a lot of unfamiliar terms and applications to fill out. One topic that is 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 are 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 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. The lender will commit and lock in your loan amount, interest rate, and term for a certain period while you find a home.
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 are a serious buyer.
How do I get one?
To receive a pre-qualification from A+FCU, submit a loan application. Once you submit the application and have the required documents, a mortgage expert will contact you to talk about your options and answer any questions you may have.
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