Are you looking to buy a new home or property through a mortgage loan? You’re probably at that stage where you’re searching for options and learning about the things you need to qualify for financing. You’ve likely come across the terms “pre-qualification” and “pre-approval” and now, you’re wondering if they are the same.
While both are vital steps in the mortgage application process, they are not the same things. A reliable mortgage company in Utah can explain them to you in detail and assist you in either process. Fortunately, though, this article can already give you a headstart. Read on to get a basic understanding of these two terms.
Pre-Qualification: An Overview
Many lenders use pre-qualification as the first step in the mortgage application and approval process. In this stage, the lender will ask you several questions for them to get a picture of your financial status and capabilities. These questions will also help the lender gauge if you are a good mortgage candidate.
During pre-qualification, the lender’s representative may give you a rough estimate of how much you can borrow should you pursue a mortgage loan application. Pre-qualification usually only takes a few minutes, and it can be done over the phone. Most mortgage companies also perform pre-qualification for free.
What’s Next After You Get Pre-Qualified?
After the pre-qualification session, the lender may send you a pre-qualification letter. This letter essentially summarizes the information you provided and gives you an idea of the amount that you may be able to loan.
You must take note that this letter does not guarantee a loan amount or approval. When you get pre-qualified, though, it somehow serves as the green light to proceed to the next step, which is pre-approval.
Pre-Approval: An Overview
Pre-approval is similar to pre-qualification in such a way that the lender will assess your borrowing capabilities in both steps. However, pre-approval is more in-depth than pre-qualification.
Besides asking you questions to verify your financial status, the lender will also get and assess your credit report. They will also ask you to provide proof of income.
Based on your credit score and other information, you may get pre-approved to apply for a mortgage loan. When you do, you will receive a pre-approval letter, which is often valid for 90 days. You can then use this letter within the validity period to show a lender that you are a qualified borrower.
What’s Next After You Get Pre-Approved?
When you get pre-approved, you can start looking for a home or property to buy. If you already have a target, you can start working with a real estate agent or broker to negotiate the property’s price. When the seller accepts your offer, you can now proceed with the mortgage loan application.
Aside from your pre-approval letter, you may also be asked to provide other documentation and to comply with other requirements. The next steps will be loan processing, underwriting, and final verification. Soon enough, your loan and the sale will come to a close!
The Bottom Line: You’d Want to Go Through Both
Pre-qualification and pre-approval will both help you go through the home buying and mortgage approval process. Even though pre-approval gives you a more solid idea of how much you can borrow, pre-qualification lets you know whether you can borrow in the first place. So, it won’t hurt to go through both.
