Mortgage Pre-qualification vs. Pre-approval: What you Need to Know
Purchasing a home is a process, and in the current competitive market, it makes sense to set yourself up for a successful experience. Getting pre-qualified for a mortgage loan proves to be a key advantage.
What is a Mortgage Prequalification?
In simple terms, being prequalified for a mortgage means that a lender has collected your basic financial information, and sometimes have completed a credit check, to give you an estimate of how much house you can afford.
What is Mortgage Pre-approval?
A mortgage pre-approval is one step ahead than mortgage prequalification. For a mortgage pre-approval, you complete a mortgage application. The lender will then verify the information you provide, and will also perform a credit check. If you are eligible, you will get a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount. This pre-approval offer is valid for 90 days.
What Information Do You Need to Provide?
|
Pre-qualify |
Pre-approval |
|
Employment Information |
Copies of pay stubs that show your most recent salary information |
|
Credit Check |
Credit check |
|
Basic Information about bank accounts |
Bank account number or two most recent bank statements |
|
Down payment amount and desired loan amount |
Down payment amount and desired loan amount |
|
No tax information is needed |
W-2 statements, personal and business tax returns from the past two years |
Mortgage Prequalification vs. Pre-approval Comparison
|
|
Prequalify |
Pre-approval |
|
Benefits |
You can start looking for houses knowing how much you will be able to afford |
You will be ready to make an offer to the seller. It will gain you competitive advantage over other potential buyers. |
|
Process |
Provide basic financial information to the lender and get a pre-qualification letter within minutes. |
After submitting the required documents for the loan application, you will receive a decision within 10 business days. |
|
Documentation |
Need to answer a few questions designed to evaluate your financial situation, plus a credit check |
Need a proof of financial information, plus a credit check |
Pre-qualification vs. Pre-approval: Which One is Right for You?
For first-time homebuyers, a mortgage pre-approval tends to be more helpful, especially when they are establishing their budget for home buying and need an idea of how much they might be able to afford.
Pre-approval comes out really handy when the homebuyer is ready to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. The seller will take your offer more seriously if you have your creditworthiness and finances verified from a lender.
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The post Mortgage prequalification vs preapproval and what you need to know appeared first on Affiliated Mortgage.
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