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What’s the Difference: Pre-Qualified vs. Pre-Approved

Are you considering purchasing a home? One of the initial steps you should consider is getting pre-qualified or pre-approved for a mortgage. While both processes involve disclosing your financial status to a lender, they are different. Naturally, questions arise in the minds of those starting on the exciting homeownership journey: What distinguishes these two, and which suits your needs? So, to ease your job, we’re here with this guide to navigate the intricate differences and understand the nuances so you can make informed decisions about mortgage pre-approval vs pre-qualification, which one is best for you.

What is a Mortgage Pre-Approval?

A mortgage pre-approval involves a thorough assessment by a lender, examining your financial background, credit score, and pertinent records. This in-depth analysis aims to establish the highest loan sum you are eligible for. It offers a definitive loan commitment, signifying the lender’s readiness to fund your home acquisition up to a particular limit.

Requirements of Mortgage Pre-Approval

To get pre-approved for a mortgage, you’ll need to provide the lender with some information. The lender will use this information to calculate your debt-to-income ratio and credit score. They will also consider your job stability and other factors.

Let’s have a look at the following information required for mortgage pre-approval:

  1. Social Security number
  2. Date of birth
  3. Contact information
  4. Employment history
  5. Income information
  6. Asset information (e.g., bank statements, investment statements)
  7. Debt information (e.g., credit card balances, student loan balances)

What is a Mortgage Pre-Qualification?

Mortgage pre-qualification, on the other hand, is an initial assessment of your financial situation. Based on the information you supply to the lender; it provides a rough estimate of how much you could be qualified to borrow. Pre-qualification, unlike pre-approval, does not require a complete study or a credit check. It’s a short first step that will help you understand your borrowing capability.

Requirements of Mortgage Pre-Qualification 

To get pre-qualified for a mortgage, you’ll generally need to provide the following information to the lender:

  • Income Estimated
  • Approximate Debt
  • Estimated Down Payment

How Long Does Mortgage Pre-Approval & Pre-Qualification Take?

Mortgage pre-approval usually takes a few days to a week. After you’ve provided the relevant information, the lender will analyze it and decide. If you’re pre-approved, the lender will send you a letter stating the maximum amount you may borrow and the interest rate you’ll likely qualify for. In contrast, Mortgage pre-qualifications are typically very quick and easy to get. You can often get pre-qualified online or over the phone in just a few minutes.

How are Pre-Qualifications and Pre-Approvals Different?

The main difference between a pre approval vs pre qualification mortgage is that pre-qualification is based on your self-reported information. In contrast, a pre-approval is based on a verified review of your financial situation.

Another difference is that a pre-approval is a stronger indication to sellers that you’re a serious buyer. When you make an offer on a home, you can submit your pre-approval letter to the seller to show that you’re qualified for a mortgage and that you’re likely to be able to close on the sale.

Which Should You Get?

If you’re serious about buying a home, you’ll think about mortgage pre-approval vs pre-qualification, which is best for you. But it’s best to get pre-approved for a mortgage. This will give you a better understanding of how much you can afford to borrow, and it will make you more competitive in the housing market.

However, if you’re just starting to explore the possibility of buying a home, you may want to get pre-qualified first. This will give you a general idea of what you can afford, and it can help you narrow down your search.

In case you’re not sure which option is right for you, talk to a mortgage lender. They can help you assess your financial situation and determine the best course of action for you.

See Also : What’s the Difference: Pre-Qualified vs. Pre-Approved

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