What is the difference between a pre-approved and pre-qualified for home loans?
|Results||A ballpark loan estimate||A preliminary credit review|
|Credit Check||No credit check||Does include a credit check|
It’s relatively easy to get a letter of pre-qualification. The process of securing a pre-qualification letter typically involves calling up a mortgage lender and providing them with some financial information.
A pre-approval, on the other hand, involves a preliminary credit check. Pre-approval provides you with a better estimate of what a home loan will look like for you.
Often, homebuyers will get pre-qualified as a preliminary step at the beginning of their home buying process. When you start looking for homes, you’ll contact a mortgage professional for pre-approval.
The Pre-Approval Advantage
Being pre-approved gives you a dollar figure and a monthly payment with which to work. When you’re pre-approved, you’ll have a general idea of just how much you’ll be able to borrow.
Knowing your price range enables you to make more informed decisions on which homes you can afford. Without a pre-approval, your borrowing amount is subject to a number of factors. These include your credit score and history, existing debt, and your debt-to-income ratio.
The Preferred Choice
Both sellers and real estate agents prefer pre-approval. A letter of pre-approval positions you as a legitimate candidate who is ready to buy.
Selling parties take a pre-approval letter more seriously than a qualification letter. Sellers are more likely to want to negotiate with a pre-approved buyer. It provides reassurance that the buyer is qualified financially.
As the buyer, pre-approval affords you some leverage when negotiating with the seller of a home. Moreover, you will feel more confident making an offer when you have a pre-approval letter because you know for sure that you are able to obtain financing.
Another hidden benefit is that real estate agents may work harder for you as a pre-approved buyer. A realtor will often put more time into a sale for a pre-approved buyer. That buyer has already shown himself or herself to be a valid contender.
Become Pre-Approved for a Home Loan
A pre-approval letter is a great tool to have in-hand when you are looking to buy a home. Of course, the mortgage is still subject to the home’s appraisal, possibly a home inspection, and any changes that might occur in your financial situation before closing. The pre-approval letter you obtain from your lender isn’t binding for either party, but as a form of evidence that you are prepared to buy a home, it is stronger than a pre-qualification letter.
At Chris Doering Mortgage, we help our customers through every step of the home buying process. Fill out our pre-qualified home loan application and contact one of loan originators to start the process of pre-approval.