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Pre-qualified or Pre-approved for a loan?
Before you begin to shop for a new home, you should take time to figure out how much you can afford. This will put you in a better position as a buyer. It is also important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, you will complete a mortgage application and provide various information about your employment, assets and financial status. We’ll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. We will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend.
Getting pre-qualified for a loan gives you competitive advantage over other buyers that have not started the process, but getting pre-approved makes you a perferred buyer as you have already been approved for a loan.
To get pre-approved, you will follow the same precess as pre-qualification, only we will take it a step further by completing the credit portion of the underwriting of your file and issuing a loan commitment to lend based upon your credit.
The pre-approval letter is also conditional on: an appraisal, title, and survey of the home you wish to purchase and your financial situation to stay relatively the same and interest rates to stay relatively level. If you pre-approval expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
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