There are a lot of terms used in the mortgage and real estate industry that may be confusing. But its easy to see the difference between being Pre-Qualified for a loan v/s Pre-Approved!
Pre-Qualification is Quick, Easy and Non-committal
A pre-qualification for a mortgage is quite simple. You call a lender, or visit their website, and provide some basic information. Things such as your annual income, your approximate credit score and your current debt payments are usually all that is requested. With this information, the lender will then tell you the range of mortgages that fit with your information.
Although this sounds good in theory, it is really just a casual conversation between you and the lender. You have not provided any supporting documentation for your financial situation. The lender has not provided any formal letter stating that you can buy a home.
Think of it like this; if you call a local department store and ask for a price to buy a pair of jeans and a t-shirt, the clerk will likely give you a rough estimate. However, this does not take in to account your style preference, color choice or even your size. It is just an idea of how much you might spend on some clothes, but nothing real definite.
Pre-Approval Shows that You are Ready to Buy a Home
Compared to the pre-qualification, a pre-approval is proof to real estate agents and potential home sellers that you are ready to buy a home. Getting pre-approved is quite detailed and may take a few days compared to the 10 minutes of a pre-qualification.
For starters, you will be asked to provide multiple documents to a lender.
The lender will take all of this info and pull an updated credit report for you. The financial data and credit report will be reviewed with a bit of scrutiny. The lender will compare your information to the mortgage guidelines and decide if you are pre-approved for a loan.
If you are pre-approved for a mortgage, the lender will then provide you with a pre-approval letter. This letter will usually have your name and the lender’s name on it. It will state that the lender has looked over your information and determined that you are a good risk for a mortgage.
Summing Up Pre-Approval Vs Pre-Qualification
Getting pre-qualified is a good idea if you are considering changing your living arrangements and MIGHT want to buy a house. When you feel that you are fully READY to take the plunge and buy a home, that is when you should seek out a lender and get pre-approved for a home. We have several Lenders on hand to help with getting your approval done FAST and FREE!! So call us today and let's get you into your new home! 757-506-4636