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!
Getting pre-qualified is one of the first steps in the homebuying process. When you supply your lender with your overall financial information, they review everything to determine how much you, as the borrower, can expect to receive. The process is quick and easy, and usually isn’t accompanied with any fees. When you’re prequalified for a home loan, you will get an estimate of what you may be able to borrow, based on the financial information you provided. Once you have this information, it opens the opportunity to discuss your goals and needs with your lender regarding what mortgage may work best for you.
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.
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
- Social Security number
Your lender will want to take a look at your entire financial situation. The information you’ll need to provide is:
- Proof of income
- Employment verification
- Proof of assets
- Credit history
- 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.
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.