What is the difference between loan pre-approval and pre-qualification?
Pre-approval and pre-qualification are steps you can take to line up your mortgage loan before you start house hunting. They are different, so read on:
- is actually applying for, and getting, a conditional commitment for a mortgage loan up to a specific amount of money.
- is usually good for 60-90 days.
- applies, even though you might not have chosen the home you will buy.
- often requires a loan application fee.
- gives you bargaining power, because it tells the seller you are ready to buy and able to get financing.
Some advantages of pre-qualification and pre-approval are:
- is the result of a lender taking a cursory look at the buyer's income, credit history and assets.
- states the buyer probably could afford to buy up to a certain limit.
- does not include a loan commitment.
- tells sellers you're serious about buying and their house is in your price range.
- usually costs no more than the credit report fee.
- A pre-approval or pre-qualification can speed closing because the paperwork for the loan has already been started.
- You will begin learning about the financing process, and any problems that might arise can be resolved early.
- You know in advance how much you can borrow.
- Your offer is more attractive to the seller, because the seller won't have to guess about whether you can afford the house.
Where do you begin when it's time to look for a new house? Start by calling or e-mailing us with your home-buying questions. We can give you an idea of how much home you can afford to buy, then you can follow up with your local lender.