The difference between being pre-approved and pre-qualified for a home loan
You’re ready to shop for a home. Congrats! What’s more important, getting prequalified or preapproved for a home loan? Prequalification is part of your research phase. It gives you an estimate of the amount of money you qualify for. Preapproval is a hard analysis of your financial assets. It’s what you need to present to the seller to prove you’re a serious buyer. Once you have a preapproval letter, it’s time to do some serious home shopping.
Getting a Feel for Your Loan
The initial step towards a home loan is getting prequalified. Do this first to get a general idea of the type of home you can afford. You supply the lender with your overall financial picture: assets, income, and debt. They give you an idea of the funds you’re going to have to work with.
You can get pre-qualified over the phone or over the internet. It’s a quick and easy way to discuss your housing goals and the needs you may have regarding your mortgage.
The Green Light to Shop Like You Mean It
When you’re ready to get serious about buying, you’ll need a preapproval letter. Real estate agencies require these to confirm that you’re a serious buyer. The bank or lender runs a hard credit check on your financial background. No stone is left unturned!
You can count on the lender to approve you for roughly the amount of money they declare in the preapproval letter. It’s not quite a guarantee, but it’s close. Preapproval gives you an idea of the interest rates of the loan and may even be able to confirm a specific rate.
As long as you find a home at or below the agreed-upon price level, you shouldn’t have any problem getting a commitment letter once you find a home. The appraiser who works for the lender will take a look at the house and bring up any issues that may alter the value of the home.
These may include outstanding litigations, structural repairs, and other quality concerns. Once you have the loan commitment letter in-hand, you can start doing your victory dance.