You’ve probably heard the terms pre-qualified and pre-approved, but is there a difference? In short, yes, there is a difference. You may have even used these terms interchangeably, not realizing there are some important differences between these words. No need to worry, that’s why we’re here! We will explain each term and their differences so you can go into the homebuying process as a confident buyer!
Pre-Qualified
Since your pre-qualification is based on the information you choose to provide your lender with, the amount you qualify for isn’t necessarily set in stone.
Pre-Approved
Getting pre-approved is a little more involved than getting pre-qualified. In order to be pre-approved, your lender will take a more in depth look at your financial situation. You will also be required to fill out a mortgage application.
To get the pre-approval process going, you’ll need:
- W-2 statements
- Pay stubs
- Bank statements
- License
- Social Security number
- Proof of income
- Employment verification
- Proof of assets
- Credit history
- Identification
- Debt-to-income ratio (DTI)
Once this is all reviewed, if you are pre-approved, you will receive a pre-approval letter. Your pre-approval letter will have the exact loan amount that you’re able to borrow. This is helpful, because once you have a set amount, you won’t be tempted to look at houses outside of your price range.
Summary
Pre-qualification is great when you’re interested in finding out the ballpark range of what you may be approved for. This allows you to begin looking at houses that may fall in your price range. When you’re pre-approved for a mortgage, you’ll be at an advantage when making an offer on a house. Since you’ll have the exact amount that you’re able to borrow approved, the seller will know that your offer is serious.
Ready to get started? Team Crescenzo is ready to help.