In the latest installment of the “Buyer Be Ready” series, is a brief comparison of pre-qualification and pre-approval for a mortgage loan. As many may not think to ask “what’s the difference?”
So here it is, short and sweet. And remember to consult a licensed mortgage professional for further clarification as well as once you’re ready to buy a home and finally attain a loan!
Pre-Qualification is simply having been informed of an estimated or an approximate amount of a mortgage that you should be able to qualify for. It doesn’t commit you to anything and there is no loan amount or interest rate promised, nor is it an in-depth look at your ability to purchase a home. Simply put, there is a bit less of a guarantee that you will get a loan than if you went through the pre-approval (which will be pending while you’re in the active search for a home with an agent). It can take place over the phone or online with you supplying the basics and maybe just a bit of financial information (estimated annual income, home address, how long at residence, etc.). Usually, you can get pre-qualified at sites like Lendingtree.com, or on a bank or lender’s website. Once you’re given the details of pre-qualification, you’re not obligated to proceed with getting Pre-Approved. It is however, a good first step in seeing where you stand in this current market and hopefully a motivator to get you to purchase.
Pre-Approval, is a much more concentrated process, and the necessary first step to buying your home when you’re ready to finally make the move. Undergoing the pre-approval process involves locking in an interest rate and determines what you REALLY can afford. Once you have decided you finally want to own a home, it is best to do in person.
Patrick Hooper of Prosperity Mortgage in Washington, DC simply states:” Pre-Approval is always better. A “pre-qual” is like a car wash; a pre-approval is like a complete car detail!”