Mortgage Loans: The Difference between Pre-Qualified and Pre-Approved
The first step in the mortgage process is getting pre-qualified for a home loan. You supply a lender with minimal information about your monthly income, outstanding debts and any assets you might own (such as a car or savings). Lenders use this information to determine how much money you could realistically borrow. The pre-qualification process is free of charge to the consumer. The next step in the mortgage process is a pre-approved loan. You complete a full mortgage application (called a 1003 form) and supply a lender with all the necessary documentation to check your financial background and pull a credit rating on your payment history with creditors. After analyzing your application, the lender will approve you with a maximum loan amount that you can borrow to use for a home mortgage loan. The Advantages of Pre-Qualifying and/or Pre-Approval for a Home Loan
The obvious advantage of getting a Pre-Qualified and/or a Pre-Approved for a mortgage loan is that both of these steps help you know how much you can afford to spend. This prevents you wasting time looking at properties that you can not afford. The initial Pre-Qualified Loan stage allows you to discuss with your lender any goals or needs you may have regarding your mortgage. He or she can then explain your mortgage options and recommend the loan type that might be best suited to your situation. Getting Pre-Approved also enables you to move quickly when you find a home you like and make an offer that is not contingent upon obtaining financing. It lets a seller know your offer is serious and could keep you from losing out to a purchaser who already has financing arranged. In hot real estate markets like California, many real estate agents will not accept an offer unless the buyers have been pre-approved already.
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