As far as mortgage applications are concerned, there is an enormous difference between pre-qualified and pre-approved. Along the ride to mortgage there are many bumps, and in order to prepare for some of them, you need to understand the meanings and ramifications of both terms.
Pre-qualification is simple and refers to the very first stage in the process of acquiring a mortgage. It involves turning over all your financial information, debt, income and assets, to the lender from whom you wish to acquire a mortgage. The lender then evaluates all of your information and determines the qualifying amount. Pre-qualification is superficial, usually free and can be done over the Internet or the telephone.
Pre-qualification does not insure anything and the amount indicated is just the marker for that which you might expect to be approved. It does not carry the same weight as pre-approved because it is a quick procedure that is based exclusively on the information that the buyer provides to the lender. Pre-approval is the next step and it is much more complicated.
Pre-approval requires that you fill out an official mortgage application for which there is a fee. The application supplies the lender with everything required to perform a check on your credit rating and financial background. At this point, you can learn the specific amount for which you have been approved and the interest rate you will be charged on the loan. You might even be able to lock in a specific rate.
With pre-approval comes a commitment in writing (albeit conditional) for an exact loan amount. The advantage to this is that now you know what price level you need to look for when shopping for a home. From the seller's point of view, this gives you a buyer's edge as pre-approval puts you one step closer to an actual mortgage. Both pre-qualification and pre-approval offer the advantage of knowing in advance how much you can afford to spend on a home. You will avoid wasting time by looking at those homes you can't afford, and when you find what you want you will be able to move quickly, as a sale will not be contingent on obtaining financing.
Pre-qualification is simple and refers to the very first stage in the process of acquiring a mortgage. It involves turning over all your financial information, debt, income and assets, to the lender from whom you wish to acquire a mortgage. The lender then evaluates all of your information and determines the qualifying amount. Pre-qualification is superficial, usually free and can be done over the Internet or the telephone.
Pre-qualification does not insure anything and the amount indicated is just the marker for that which you might expect to be approved. It does not carry the same weight as pre-approved because it is a quick procedure that is based exclusively on the information that the buyer provides to the lender. Pre-approval is the next step and it is much more complicated.
Pre-approval requires that you fill out an official mortgage application for which there is a fee. The application supplies the lender with everything required to perform a check on your credit rating and financial background. At this point, you can learn the specific amount for which you have been approved and the interest rate you will be charged on the loan. You might even be able to lock in a specific rate.
With pre-approval comes a commitment in writing (albeit conditional) for an exact loan amount. The advantage to this is that now you know what price level you need to look for when shopping for a home. From the seller's point of view, this gives you a buyer's edge as pre-approval puts you one step closer to an actual mortgage. Both pre-qualification and pre-approval offer the advantage of knowing in advance how much you can afford to spend on a home. You will avoid wasting time by looking at those homes you can't afford, and when you find what you want you will be able to move quickly, as a sale will not be contingent on obtaining financing.
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