What’s the difference between a Pre Qualification and a Pre Approval?
Two often confused terms in the home buying process are a loan pre-qualification and a loan pre-approval. See Video.
- Simply an estimate of how much house you can afford.
- The best time to get a pre-qualification is right at the beginning of your home buying process, before you even start looking at houses.
- This involves talking with a lender and providing information on your income, assets, debts, and a potential down payment amount.
- The lender would then provide you with an amount in writing of how much he thinks you could afford to pay for a monthly mortgage.
- There is no cost involved and there is no commitment on either side.
- This estimate is just helpful for you to figure out if buying a home is a viable option and what your price range would probably be.
- Getting pre-approved means that you have a tentative commitment from a specific lender for mortgage funding.
- You provide a lender with actual documentation of your income, assets, and debts.
- This process may require an application fee, since the bank will run a credit check and work to verify all your employment and financial information.
- Once you are approved, the lender will give you a letter of commitment, stating how much money the bank is willing to loan you for a home purchase.
- With a pre-approval in hand you can start your shopping - real estate agents and sellers will take you much more seriously when they see you have your mortgage funding in place.
- It is important to understand that even a pre-approval is not a guarantee that you will be approved for a mortgage loan.
- The funding will only be given when the property appraisal, title search, and other verifications check out on the home you have chosen to buy.
- The pre-approval is not binding; you can still obtain a mortgage from a different lender.
- If you do stick with the same company that pre-approved you, the application process will be much shorter once you find the right house.
GRI, Certified HAFA Specialist, SFR
Cal BRE# 01775108BERKSHIRE HATHAWAY HomeServices,
1801 W. Avenue K
Lancaster, CA 93534