Pre-approvals and pre-qualifications are the two most common terms that you’ll come across when applying for a Mortgage. Do you know these terms help you decide how much home can you afford and understand the procedure to apply for a mortgage?
Getting pre-approved for a mortgage is the first step to becoming a potential buyer. The time when the lender takes you seriously and will consider your loan application. Whereas prequalification refers to a rough estimate that a loan officer makes after knowing your current financial status.
In this article, we’ll discuss in detail the importance of both the preapprovals and prequalifications. Read to find out why it’s essential to get them?
What is a Mortgage Pre-qualification?
Mortgage prequalification is just the first step but you can’t just rely on this process. Prequalify as the name suggest is to know whether or not you are eligible to apply for a mortgage. For example: If you’ll contact our mortgage lending officer, he’ll ask you a few questions to know your present financial status.
This phase only required self-reported information with no documents required. We recommend being true to yourself and to the lender. So, the lender can reveal the true status and tell you whether or not you can afford the mortgage?
A prequalification letter is not a guaranteed loan offer!
Basically, the aim is to get commitment from the lender that they can loan you a certain amount of money. Keep in mind that different mortgage lenders have set different prequalification criteria for the client.
Mortgage prequalification gives you a rough estimate that how much house can you actually afford? You can also ask for the closing cost.
It’s important to get a prequalification letter from the mortgage lenders. So the real estate agents take your application seriously and will help you buy your new home.
What is Mortgage Preapprovals?
Getting a Pre-approved certificate or letter from the mortgage lender is essential. It’s an official step that includes verifying your financial status and credit record. You have to submit or upload scanned documents in this phase. It includes:
- Credit score
- Transaction record
- Employment history
- Bank statements
- Gross income.
- Pay stubs
- tax returns
- Social Security card.
It’s the phase where the lender will let you know how much home can you afford? Getting preapproved increases your credibility and you become the worthy buyer. It reveals that you are a verified borrower, and can afford the loan. Also, the real estate agent will actively work on your application.
Why preapprovals are important?
- A preapproval letter states you are capable enough to pay monthly installments, and house taxes, and can bear the maintenance cost.
- Once you become a verified borrower, it becomes easy for real estate agents to find a home in your budget in your preferred locations.
- Your financial status is not hidden, and lenders can trust you easily.
- It becomes easy for the lender to decide your mortgage interest and monthly mortgage payments on a fixed or variable rate.
- The sellers also get satisfied that you are worthy of buying a home.
So, now you know the various benefits of getting pre-approved! Well, if you are thinking to proceed without getting a preapproval letter, it may slow down your mortgage process.
Important: Both the preapprovals and pre-qualifications are only estimates or guides that encourage you to find your dream home.
The full mortgage approval includes many formalities such as home inspection or dealing with the third party willing to buy the same home.
Wanna get pre-approved with US Mortgage?
Our lending loan office will tell you the true financial status report revealing what you can and what home you can actually afford. What can you expect from USM?
- Prequalified Letter: unlike other mortgage lenders, we focus on more accurate prequalified approval which is way better than a letter based on the estimate. We’ll ask you some questions about your income, assets, and other pending mortgages if any.
- Get Preapproved: The next official step towards becoming a verified borrower. Visit us or upload the required scanned document. Not only it strengthen your loan application but also increases your credibility among real estate agents,and sellers. So, they’ll know your budget while looking for home.
FAQs about Preapproval and Prequalified!
What is the difference between getting pre-approved and pre-qualified?
The pre-qualification process gives you a rough estimate of your financial status. It doesn’t guarantee you are qualified for the mortgage.
Whereas Preapproved makes you a verified borrower and the lender commits that the certain amount of loan they can lend you.
Why pre-qualification is important?
Pre-qualification lets you know your affordability and the improvement required in maintaining a high credit score. Also, you’ll get to know the approximate loan you can borrow.
Also Read: Can I Buy The House With A Bad Credit Score?
Getting prequalified and preapproved in the early stages of your home search makes the mortgage process smoother and easier. Now you know the difference between being prequalified and preapproved.
In our opinion, both are equally important and let you, the lending officer, and the seller know where you stand? And, whether or not you can afford the home?