What is the Difference Between Pre-Qualified and Pre-Approved for a Loan?
To purchase a home, most people will need to speak with a mortgage banker or mortgage broker to determine how much they can afford to spend by getting pre-qualified or pre-approved for a loan. The terms “pre-qualified” and “pre-approved” sound as if they mean the same thing, and are often used interchangeably; however, there are important differences that consumers should understand.
Getting pre-qualified provides an estimate of the amount you can borrow and the types of loans available to you based on the information you provide. Pre-qualification can even be accomplished over the phone and at no charge. You supply the lender with information such as your income, debts and assets, and they will perform a credit check. Your pre-qualification letter will indicate a loan amount for which you are likely to be approved, but it is not a loan guarantee. The pre-qualification estimate is only as good as the information you provide, but it does serve as a guide to the appropriate price range of homes for you to consider.
Getting pre-approved for a loan is more involved, and it provides you with a specific amount you can borrow based on a more thorough review of your financial data. You begin the process by completing a mortgage application, paying the application fee, and providing the lender with certain financial documents such as W-2 forms, bank statements, and any documentation of your other assets. The lender will also verify your employment and perform a credit check. All of this information goes through the underwriting process to provide you with a conditional commitment for a specific loan amount.
Getting pre-qualified or pre-approved is only the first step. I am realtor in Brevard County, Florida and I work with homebuyers every step of the way in purchasing a home, and I look forward to working with you.