You may have heard about getting “prequalified” for a mortgage or getting “preapproved” for a mortgage. Since they sound similar and are used interchangeably by people in the industry, this can get confusing. Both can be helpful and important steps in the process of getting approved for a mortgage but there are some crucial differences between the two that’s why it is important to understand the difference between pre qualification and pre approval.
Getting into the pre qualification or pre approval process is a smart move when you’re at the very beginning of the home purchase process, as it gives you an informal estimate of the loan amount you may be approved for. This is really helpful in determining your budget for a new home. It can also alert you to any potential issues that may prevent you from getting approved for a mortgage, so that you can work to address those issues before you go too far down the path of looking for a new home. To get prequalified, you just need to give some basic financial information to a lender.
Getting the pre approval for a mortgage is similar to getting the pre qualification, but it is more in-depth and is more official, which makes it more valuable if you’re serious about buying a home. Many sellers will want to see a mortgage preapproval letter as proof that you’re serious. The preapproval process will also give you more detailed information about your financial situation and creditworthiness, and by the end of the process, you’ll learn about your loan options. In order to get preapproved, you need to give a lender detailed information about you and your finances, such as proof of ID, W-2 forms, and pay stubs. The lender will also perform a credit check. Once they determine how much you can be approved for, you will receive a letter documenting this information, and that letter will be valid for 60-90 days. This letter isn’t a guarantee, but it is a very helpful tool in the home buying process.
So even if you’re only just starting to think about home ownership, getting prequalified is a great first step. If you’re getting more serious about wanting to purchase a home, getting preapproved is the way to go, so you have a solid understating of the financials and are a more attractive buyer.
If you have any questions about getting the pre qualification and pre approval, get in touch with our team – we’re happy to help. If you are ready to get started, we’ll guide you through the process!