When applying for a home loan, it’s important to understand the difference between pre-qualifications and pre-approvals. While both are important steps in the loan process, they provide very different levels of assurance that you’ll be able to secure the loan.
Before you start the home buying process, it’s a good idea to get pre-qualified, because it gives you an idea of how much you can afford and can help you narrow down your home search. Pre-qualification is the first step in applying for a mortgage loan. It involves having a lender review your financial information, such as your income, debts, and savings. Your lender may also want to look at other financial documents like your tax returns. This helps them understand your financial situation and determine what type of loan you may qualify for, estimated loan amount, and interest rate. A pre-qualification is not a guarantee of loan approval, but it does provide an estimate of what you may be able to borrow.
Pre-approval is the next step in the loan process and is much more in-depth. In order to be pre-approved, the lender will require a more detailed review of your finances. This includes a full credit report, proof of income, and other documents. The lender will use this information to determine if you qualify for the loan, and if so, how much you can borrow.
Pre-approval gives you an advantage when making an offer on a home, as it shows sellers that you are serious and have been approved for a loan. Overall, it’s important to understand the difference between pre-qualifications and pre-approvals. Pre-qualification provides an estimate of what you may be able to borrow, while pre-approval gives you a better indication of your chances of getting a loan and how much you can borrow. Knowing the difference between the two can help you determine which is best for your situation and make the process of applying for a loan easier.
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About the Author
Aaron Bacus has been has been in the mortgage business and originating loans for thousands of clients since 1997 and is the Vice President of First Coast Mortgage Funding in Jacksonville, Florida.