June 30, 2020
WHAT’S THE DIFFERENCE?
If you are considering purchasing your first home, you may have heard of getting pre-qualified or pre-approved first. Both are good, but pre-approval carries much more weight than the other. Pre-qualification estimates how much you may be able to borrow, based on an informal evaluation of your finances. Pre-approval requires documentation and provides a specific amount that you are eligible to borrow.
PRE-QUALIFICATION
Pre-qualification is an good first step in your home buying journey to obtain an estimate of what you may be able to borrow. This is based on an informal review of your finances with a mortgage lender and a usually a credit check. It is a great opportunity to discover what mortgage options are available, how much roughly you can expect to put down. You’ll work with your lender to identify which option best suits your goals and needs. Pre-qualification gives you an estimate of what you can borrow.
PRE-APPROVAL: A STEP FURTHER
Pre-approval takes pre-qualification a step further. You will complete a mortgage application and provide proof of your income, debt, and assets to the lender so they can be verified. It is not an estimate and will tell you the specific loan amount that you are eligible for.
PREQUALIFICATION VS. PRE-APPROVAL COMPARISON
| PRE-QUALIFCATION | PRE-APPROVAL | |
|---|---|---|
| Benefits | You can begin house hunting knowing how much you may be able to borrow. | You’ll be ready to make an offer with confidence and gain an advantage when the market is competitive. |
| Process | Provide basic information to a lender and quickly get an estimate. | After submitting documentation to a lender, you should receive a decision within 10 business days. |
| Documentation | Answer questions about your finances and submit for a credit check | Provide specific documentation to verify your income, debt, assets. |