Pre-Approved vs. Pre-Qualified: What’s the Difference?
The pursuit of the perfect house is like an emotional roller coaster ride—exciting, intimidating and nerve racking. After all, it is one of the biggest purchases you will make in your life. The last thing you want is to have all of your hard work fall through once you are finally ready to make an offer on your dream house.
Luckily, there are steps you can take to ensure your home buying experience is as smooth and seamless as possible. The first, and arguably most important, step is getting a letter of pre-approval from your mortgage lender.
This little piece of paper is pretty powerful! It will help you:
- Determine how much you’re eligible to borrow
- Spend less time looking at the wrong homes, and more time looking at the right ones
- Earn good standing with realtors and sellers
- Increase your negotiating and bargaining power
Before you continue your search for the perfect home, you will want to clarify that the document you receive from your lender is in fact a letter of pre-approval and not a pre-qualification. These are two very different documents that hold two very different promises.
Simply put, getting pre-qualified for a mortgage loan does not guarantee that you will be able to get a mortgage later down the road. A letter of pre-approval is the only thing that will stand up when it comes time to seal the deal on your dream home.
The scoop on pre-qualifications
When borrowers get pre-qualified for a mortgage loan, the lender is providing them with an estimate of how much they could be eligible to borrow, based on the financial information they freely provided. Because this information has not been documented or gone through the underwriting process, a pre-qualification is not a promise to lend and does not guarantee your ability to obtain a mortgage loan.
The scoop on pre-approvals
When a lender provides you with a pre-approval, they are offering you a commitment to lend. The reason lenders are able to do this is because they have documented, verified and validated your employment status, income, credit history, assets, debt obligations, and other important financial information that is needed to accurately determine your ability to repay a mortgage loan.
How to get pre-approved for a mortgage loan
Getting pre-approved for a mortgage loan is a fairly quick and simple process. To take the next step in your home buying journey and get pre-approved for a mortgage loan, visit our website and fill out the application form. Once you’ve completed the application and provided us with the necessary documentation, we will review your application and provide you with a lending decision within a matter of days.
If you’re thinking about buying a home and have questions regarding the pre-approval process, please leave a comment below or contact me at 248.658.2605.