How Pre-Approval Differs from Pre-Qualification of a Mortgage

If you wish to lock in low home mortgage rates and improve your chances of owning your dream house, you should consider pre-approval on your home loan.

Pre-approval will help you:

• Know how much you can borrow
• Confirm your ability to qualify for a mortgage based on your credit, financial, and employment information
• Strengthen your position to make an offer on a house because sellers are usually more willing to accept offers from pre-approved buyers

Here’s how it works:

The lender will review your credit, financial, and employment information after you fill out an application. If you qualify, you’ll receive a letter that says your mortgage loan is approved for a certain amount of money, for a certain amount of time. Being pre-approved does NOT mean you have to use that lender. You can still shop around and compare.

Pre-qualification is not the same as pre-approval.

Mortgage pre-qualification is a free test run of the loan application process. It usually takes a few hours. The mortgage lender uses your credit, financial, and employment information to come up with an estimate of the mortgage amount you can afford. It’s not binding.

A pre-approval, on the other hand, l may require a complete application, along with an application fee. Usually, a pre-approval is your lender’s guarantee of the amount they will lend you toward a home.

That’s why it provides borrowers with such leverage. If a seller sees that you’ve actually been pre-approved, he/she knows you’re a reliable consumer.