January 10th, 2018 7:09 AM by Jackie A. Graves, President
As you prepare to finance a new home, chances are you’ve come
across mortgage pre-approval,
mortgage pre-qualification, or possibly even both. So what does it mean to get
pre-approved vs. get pre-qualified for a mortgage, and what’s the difference
between the two? Let’s take a look.
pre-approval and mortgage pre-qualification have the same great benefits for
anyone considering purchasing a home with a mortgage:
addition to the benefits mentioned above, it’s important to remember that
neither pre-approval nor pre-qualification is a guarantee that you’ll receive a
loan from the lender. You are also not obligated to get a mortgage form the
lender who pre-approved or pre-qualified you. While many home shoppers opt to apply
for a mortgage with the lender who pre-qualified or pre-approved them, you
should always shop around before applying for a mortgage.
The Differences between Pre-Approval and Pre-Qualification
to the Consumer Finance Protection Bureau, there is often not a lot of
difference between pre-approval and pre-qualification. Sometimes, lenders use
the terms “pre-qualification” and “pre-approval” interchangeably. And different
lenders might have different definitions for each. But generally, here’s how the
two may differ.
is often seen as the first step in the mortgage process, and pre-approval is
the next step. With pre-qualification, you’ll supply an overview of your
financial history to the lender, including income, assets, debts, and credit
score. The lender will review this information to give you an estimate of what
you would qualify for. Mortgage pre-qualification doesn’t always require
documentation of your financial history; it can often be self-reported.
Mortgage pre-approval is very similar, but it usually requires documentation
and verification of your income, assets, and debts. And it will often require a
credit check, which will result in a hard inquiry on your credit report.
Which One Should You Get?
the terms “mortgage pre-approval” and “mortgage pre-qualification” are often
used interchangeably, it can be hard to know which one you need. It really
depends on how your lender defines the service, if you want a credit check or
not, and what real estate market you are in. Be sure to ask your lender exactly
how he or she defines “pre-approval” or “pre-qualification” (and if it requires
a credit check). Then find out from your real estate agent which version has
more credibility in your market. That way, when it comes time to make an offer,
you’ll have what you need to give sellers confidence that you’ll be approved
for a loan.
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