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Mortgage borrowers and some lenders often use the terms “prequalified” and “prequalified” interchangeably, but they are not exactly the same. Both are related to the steps you take to prepare your mortgage application, but there are some important differences.
What is the difference between getting a mortgage approved and getting a pre-qualified?
The main difference between being prequalified and being pre-approved is that the pre-equipment holds more weight when you are about to buy a home. That’s because they are based on a more thorough review of your finances, including your recent tax returns and hard credit checks. In contrast, prequalification requires only self-reported information, such as annual income and credit score range.
| Pre-qualification | Before approval | |
|---|---|---|
|
Financial documents |
Self-report information only |
Lenders will check documents such as Paystubs, bank returns, account statements and more |
|
Loan amount and interest rate |
estimate |
Accurate (pending a Rate Lock)) |
|
Time required |
It is often available within a few minutes |
It may take a few days |
|
Credit Check |
Soft credit check | Hard credit check |
|
It is necessary to make an offer at home |
no |
No, but it proves you are a serious buyer with the ability to secure funds |
What is pre-qualification for a mortgage?
Prequalifying for a mortgage will help you know how much money you can borrow to buy a home. To get prequalified, you will receive a soft credit check – it is It does not affect your credit score – And then submit basic information about your financial situation.
Pre-qualification for a mortgage is just a general indication that your lender can approve you mortgage If it is officially applied. You can usually get prequalification via telephone or a simple online application.
What is pre-approval for a mortgage?
Pre-approval of a mortgage is a letter specifying your maximum loan amount; interest rate. That said Lender’s commitment If your financial situation remains the same, we will fund the loan.
A wide range of provisions are required to obtain pre-approval document About your income, savings and debt. You will also receive it Hard credit check And report how much you plan to plan for your mortgage and help lenders do your calculations Loans and Value (LTV) ratio.
The mortgage is not a completed transaction until the loan is passed underwriting And the lender will check the information about your application. If there is a discrepancy, you may change the terms of the loan or the lender may refuse your application.
“The lender has more weight, as it means that the lender actually did more than a rough review of your credit and finances, but instead reviewed your pay stub, tax returns and bank statements.” “Pre-approval means you have cleared the hurdles required to be approved for a mortgage up to a certain amount.”
Which one should I choose: Pre-approved or pre-qualified?
There is one thing in common between pre-approval and pre-qualification. They are indications from mortgage lenders who qualify for a mortgage. But what you need to get depends on where you are Home Buying Process.
You may be prepared for pre-approval if:
- I’m ready to make an offer at home in the coming months.
- You have an excellent credit score.
- You have saved money for a down payment.
Prequalification may be a better option:
- You’re just starting to look for a home.
- You are working to improve your credit score.
- You’re still saving money for the down payment.
“Prequalification does not always lead to loan approval, so it’s important for home buyers to avoid solid plans based on their status of eligibility,” says McBride. “If the mortgage lending process is on a highway intersection, pre-qualification is a yellow light and pre-approval is a green light.”
That green light is important in today’s housing market. Some markets are particularly hot so sellers may be getting Competing offers. If you are comparing one offer without a pre-approval letter, if you are comparing offers that have one offer, they may go with an approved buyer – that’s a safer bet.
