As a first-time homebuyer, you are likely to encounter two important steps in their mortgage application: mortgage pre-qualification and mortgage pre-approval.
What’s the difference between the two? Do you need both? More importantly, which of these processes will help you advance your real estate goal? Continue reading to find the answers.
What is mortgage pre-qualification?
Mortgage pre-qualification is where you describe your current financial situation to a lender or bank. They will then give you an estimate of the amount of money you can borrow based on the information you supply.
It’s easy to undergo pre-qualification— you can do it over the phone or online. It’s also a free and quick process that takes between two to three days. This is because it doesn’t include an in-depth analysis of your credit reports and overall financial capability to purchase a home.
Once you’re done, you’ll receive a pre-qualification letter. You can show this to sellers and their agents as proof that you’ve explored your financing options.
What is mortgage pre-approval?
A mortgage pre-approval follows a similar but more intensive process as mortgage pre-qualification. Aside from merely checking your financial information, the lender or bank will also check your credit report and history and your overall financial stability.
You’ll be asked to provide a copy of your current payslip, a summary of your assets, as well as copies of any existing mortgage statements and home insurance policies. And unlike pre-qualification, you’ll have to fill out an application form.
If you meet the requirements of the lender or bank, you’ll be handed a pre-approval letter. This states the type of mortgage the lender is willing to offer, the total amount that you can borrow, and the loan terms. Much like the pre-qualification letter, you can show this letter to sellers and their agents when making offers on homes you like.
Since mortgage pre-approval requires an extensive check of your financial background, it can take anytime between a few days to a week or more. Some lenders and bankers also charge application fees.
Which one will help you buy a home?
Mortgage pre-approval is considered by most to carry more weight. Being pre-approved tells sellers you’ve been vetted by your preferred lender or bank and that you’re a serious buyer.
Do note, however, that you’re not obligated to get a mortgage loan from the lender or bank who pre-approved or pre-qualified you. In fact, we recommended that you shop around first before applying for a mortgage to get a great deal.
Do you need to get pre-qualified in order to be pre-approved?
Mortgage pre-qualification is not a requirement for pre-approval. Feel free to skip it if you think you don’t need it.
Hi, I’m Kathy Seuylemezian. An experienced and knowledgeable real estate professional, I can assist you in exploring your opportunities in the La Cañada Flintridge real estate market.