Saturday, November 7, 2009

Pre-Qual vs. Pre-Approve What's the Differance?

When you’re preparing to purchase a home, the best way to approach the process is to get your mortgage approval settled before you begin your search. By doing this you’ll be able to know what your price range is, and be ready to quickly make on offer on your dream house when you find it.

There are some differences between a pre-qualification vs. pre-approval. Pre-qualifying is an estimate of what you might be able to borrower. A pre-approval is a loan approval that carries with it certain conditions.

1. Provides an estimate of your borrowing ability
2. Based on a summary of information that you provide about your income and assets
3. Usually involve a credit check
4. Completed in a just a few minutes with a qualified mortgage loan officer
5. Most lenders do this free of charge

1. Provides proof to real estate professionals and home sellers that you are conditionally approved for a specific loan amount
2. Based upon completion of a loan application and an underwriter’s verification of your income and assets
3. Includes a credit check
Will take more time than a pre-qualification as it is a much more in depth process
4. You’ll need to provide payroll receipts, bank checking/savings statements, other asset statements (such as IRA, 401(k), brokerage) W-2’s for the two previous years, and tax returns for the two previous years
5. It is conditional and is based on a number of factors such as:
- The home you’re considering to purchase or refinance will need to appraise at the value you estimate it
- Satisfactory title review
- Meeting all the loan program guidelines for the type of loan you want
- You must ensure that no material changes occur in your personal finances like, a decrease in family income, taking on additional debt, lowering of bank checking/savings balances
6. Most lenders will do free of charge

Remember, a pre-qualification is not a comprehensive evaluation therefore it is not guaranteed so it carries far less weight with a real estate professional than a pre-approval.

1 comment:

  1. This is great information for a first time home buyer!