Purchasing a home is both an exciting and stressful time in a personís life. There are a ton of things you need to take into consideration during the whole process. How much you can afford. Where do you want to live? Yearly taxes. Finding homeowner's insurance. And whole bunch of other things you need to take into consideration.
Today Iíd like to talk to you about getting a loan to purchase your new home. More specifically, the difference between pre-qualification and pre-approval. There is a big difference between these two. One is more important than the other. In fact, one doesnít mean much at all and sellers and real estate agents wonít take you seriously if you have it. So here are the basic descriptions of a pre-qualification and pre-approval.
Provides a ballpark figure on your borrowing power.
Based on the summary of information you provide on your income and assets
Provides proof to sellers and real estate agents that you are approved for a specific loan amount
Is based on verification of your income, assets, and credit
Note that a pre-approval letter from a lender is not a guarantee from the lender that a loan will be provided
Basically, a pre-qual is just submitting some info without any of it being verified. A pre-approval verifies the information you submitted.
As you can see, clearly itís better to have a pre-approval. But again, it does not guarantee anything. So it is in your best interest to contact a mortgage professional who knows the loan purchase process and can help you getting a pre-approval. This way real estate agents and sellers will know you are serious and pay attention to you.
Your credit scores will also play a big factor in what loan programs you qualify for and how much you will be able to afford. Since a higher rate will mean you wonít be able to afford as much.
Again, all of this can be taken care of by a mortgage professional.