What is the difference between mortgage prequalification and pre-approval?
Property hunting may be enjoyable, but pulling together the finance to purchase that house with the Pinterest-worthy kitchen appears…complicated. Is this a decent beginning step? Getting an idea of how much you might be able to spend and demonstrating to sellers that you’re a serious buyer. This is where prequalification and preapproval come in handy.
So, what is the difference between prequalification and preapproval, and when should you use which?
Mortgage prequalification is an excellent beginning step.
Getting prequalified for a mortgage at the outset of your home-buying adventure is a quick and easy method to learn how much you may be able to borrow.
Simply provide your lender with some basic financial information, such as your projected household income and debt, and you’ll obtain your estimated price range in minutes online.
And, depending on the type of prequalification, the information you supply may not be confirmed by the lender, so it may have no effect on your credit score. However, you should be aware that the amount you may be eligible to borrow may be more than you wish to spend (so you have money left over to upgrade the washer and dryer or buy new furniture, for example).
When should you get prequalified?
Get prequalified before you begin house hunting so you can be confident you’re looking at homes in your price range.
Making a mortgage pre-approval official.
When you are pre-approved, the lender gives you permission for a specified loan amount under certain circumstances. You will provide your lender with more extensive financial information, such as pay stubs, bank accounts, and tax returns, and they will conduct an in-depth evaluation of your financial status to decide the loan amount and terms. Because the procedure is more precise, it also takes longer – up to a week in some situations.
Pre-approval can aid you in the home-buying process by allowing you to move promptly when you locate the ideal house and demonstrating to the seller that you have the necessary funds.
Furthermore, if a seller receives many bids, having a mortgage pre-approval might help you stand out from the crowd.
When should you get pre-approved?
If you’ve already determined your price range, have a real estate agent, and are looking for a property, you might consider being pre-approved. A pre-approval is generally only valid for 90 days and will appear as an inquiry on your credit report, so don’t apply for one until you’re ready to make offers.
When you’re ready to start looking for a home, being prequalified and pre-approved at the correct time might be beneficial. With a prequalification, you can be confident that you’re looking at houses in your price range.
Getting pre-approved for a mortgage also allows you to act quickly and shows sellers that you’re serious about. Two helpful tools for navigating the mortgage application process and transitioning from house hunter to homeowner.