What’s the difference between pre-qualification and pre-approval?
Pre-qualification is the starting point in your search for mortgage financing. A quick snapshot is taken which includes income, existing debt, savings, length of employment, etc. All of these factors will then be analyzed to determine your loan eligibility. During this phase you mortgage Professional should also discuss pros & Cons of different options to select the best program for you.
Pre-approval on the other hand, is written documentation that shows you have the support of a lender who is willing to finance you. It means an underwriter has reviewed your loan application and confirmed you qualify for the loan. Based on your income, debt ratio and savings, the underwriter provides the dollar amount you are eligible to borrow. Now you can shop around for houses that fit into that loan amount category.
Here is the nice thing about the pre-approval: It gives you the leverage to shop as a cash buyer! With a pre-approval in hand, you now have the power to negotiate. The seller will take your offer much more seriously knowing you are already approved by a lender. Pre-approval can also shorten the time it takes to close, making even a lower bid attractive to sellers who are seeking to move quickly. And in many markets where there are a limited supply of homes, having to compete against multiple other offers on a home, The Pre-Approval can be critical tool to help you win the bid on your dream home. In these areas it may even be advisable to wait until you have a pre-approval before shopping for a home.
What does it cost to get pre-approved?
Pre-approval is FREE! You have absolutely nothing to lose and everything to gain.
I hope this information is helpful in understanding some of the important steps for buying a home, but of course if you do have any questions please don’t hesitate to ask. We are here to make this as smooth and efficient a process as possible.