You’re finally ready to buy your dream house. The only thing standing in your way is your lack of sufficient funds to close on the property.
You’ve already applied for a loan, but your mortgage lender hasn’t given you a final answer on whether or not you’ll get the money. Until then, you won’t know if you’ll be able to move forward with the purchase.
The pre qualification vs pre approval mortgage process can be confusing to understand at first. In this article, we’re going to help you to understand the difference.
What Is a Mortgage?
A mortgage is a loan that is used to purchase real estate. The loan is secured by the property itself, which means that if the borrower defaults on the loan, the lender can foreclose on the property and recoup their losses.
Pre Qualification vs Pre Approval Mortgage: The Differences
Pre qualification and pre approval are the two main types of mortgages. They seem interchangeable, but they’re quite different.
A pre qualification mortgage is an initial evaluation of your financial readiness to buy a home. Pre qualification can be done over the phone or online, and it usually takes a few hours to receive a pre qualification letter.
It is typically based on information provided by the borrower, such as income, employment, debts, and assets. This information is used to estimate the maximum loan amount for which the borrower may qualify.
A pre approval mortgage is a more in-depth look at your finances and typically requires providing documentation to your lender. Pre approval requires a bit more work.
Pre approval is typically based on a credit report and other documentation provided by the borrower such as pay stubs, tax returns, and bank statements. Once your lender has all the necessary documentation, they’ll give you a pre-approval letter, which is typically valid for 60-90 days.
This documentation is used to verify the information provided by the borrower and to determine the maximum loan amount for which the borrower may qualify.
Mortgage pre qualification is the first step in shopping for a home. While pre approval is the second step and gives you a more accurate view of how much you can afford and what interest rate you will qualify for. Contact your mortgage guy now to start your application.
Requirements for Applying for a Mortgage
On both pre qualification and pre approval, there are a few requirements you’ll need to meet to apply for a mortgage. Most importantly, you’ll need to have a steady income and a good credit score.
You’ll also need to be able to provide a down payment of at least 5-20% and have a property in mind that you’d like to purchase. Some lenders may also require you to have a co-signer or a guarantor.
If you meet all of these requirements, you should have no problem applying for a mortgage and getting approved.
Knowing what pre qualification vs pre approval mortgage is will help you to have a better decide which route to take. If you are unsure of your financial situation or plan to shop around for the best deal, pre-qualification is a good starting point.
However, if you are confident in your finances and want to move forward with a loan, getting pre-approved can save you time and money in the long run.
Reaching your dream house will be one step ahead. Don’t stop; make a way!
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