Pre-qualified vs pre-approved – whats the difference?
One area that home buyers typically run into problems is not knowing the difference between being qualified for a mortgage and being approved for one.
Even if you believe you are pre-qualified for a mortgage, it doesn’t necessarily mean you will be able to get one. However, when you are pre-approved for a mortgage, your chances of getting that loan from the lender are greatly increased.
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What’s the actual difference between the two and how will that affect your ability to obtain mortgage?
This is generally the first step that you will take once you decide you would like to buy a home. This step is fairly easy. You contact a lender at a bank, or mortgage company and you give them an overview of your financial situation. You will give them information like you current debt, current income, and any assets you may have. The lender will then be able to determine based on your debts, income, and assets what you could financially handle for a mortgage. The lender will be able to explain the different programs available that would work the best for your situation. This will give you an idea of how expensive of a home you could start looking at. A pre-qualification generally does NOT include and in-depth check of your credit report and income verification. This step can usually be done over the phone or online and there is no cost for you to get this information.
This is the next step that you would take once you have determined that you want to buy a house. This step is generally more involved. You will have to complete a mortgage application with more details and you will need to supply your lender with the necessary documents required. These documents will be needed in order to complete and extensive check of your credit and your financial ability to get a mortgage. With this information, the lender will be able to give you a more specific amount that you will be pre-approved for as well as an idea of what interest rate you would qualify for. With a pre-approval in hand you will be able to look at and make offers on homes at or below your pre-approved amount.
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Once you have found a house and filled out the complete application, you will then move to the final step which is getting a Commitment. This is only issued when you physically approved to purchase a specific home. This commitment means that all of your financials and application for the home have been cleared and the home has appraised at or above the sale price. A loan commitment letter with then be issued ONLY when the bank is certain it will be able to lend you the money.
Please note: Pre-approved and Pre-qualified are NOT the same thing and DO NOT assume that you will get a loan. To be certain you are getting a pre-approval, make sure you are speaking to a lender who is going to check your credit and financials.
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Wes Oliver at Prestige Home Mortgage will be happy to explain the differences of getting pre-qualified vs pre-approved and make sure that you are pre-approved for your new home. It would be a big waste of time for you, your real estate agent, and homeowners if you are not pre-approved because you could be looking at homes that are beyond your means or worse, looking at homes to come to find out you can’t even get a loan. Don’t make a costly mistake, make sure you are pre-approved.
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For more information about the difference of getting pre-qualified vs pre-approved, we can be reached at 508.232.7926 or email us here
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