Your Home Sold Guaranteed Realty — The Nathan Clark Team

Pre-Approval vs. Pre-Qualification For Mortgage Applicants

Learn The Difference Between Pre-Approval vs. Pre-Qualification For Mortgage Applicants

Wondering about the difference between pre-approval vs. pre-qualification for mortgage applicants? These two terms are often used interchangeably, but they actually refer to different phases of the mortgage application process. 

If you’re a first-time home buyer, you may not know whether you should get pre-approved, pre-qualified, or both. In this post, our team at Your Home Sold Guaranteed Realty — The Nathan Clark Team will discuss what each term means and the best course of action for home buyers applying for a mortgage. 

What is Mortgage Pre-Qualification?

Mortgage pre-qualification is the first step in the mortgage process. To get pre-qualified, you’ll submit some of your financial information to a lender. Based on your finances, they’ll let you know how big of a loan you can expect to receive.

Pre-qualification usually takes up to a few days, and it’s typically free. It can even be done over the phone or online. 

Pre-qualification doesn’t take very long because the lender isn’t actually verifying any of your information or performing an in-depth check into your credit score or income. Instead, they’re relying on your information as you report it.

For this reason, pre-qualification doesn’t carry as much weight as pre-approval. In fact, many home sellers and realtors prefer seeing a pre-approval letter, as it shows you’re serious about purchasing a home.

So if that’s the case, what’s the point of pre-qualification? Pre-qualification is best used very early on in the home-buying process when you’re trying to figure out how much home you can afford based on your current financial situation. 

It can give you a good estimate if you aren’t quite ready yet to establish a specific budget or haven’t decided which lender to work with.

What is Mortgage Pre-Approval?

Mortgage pre-approval is the next step after you’ve been pre-qualified, and it’s a sign that you’re more serious about applying for a loan. When you apply for pre-approval, you’ll decide which lender you want to work with and send them your financial information. 

Unlike with pre-qualification, you’ll have to send in relevant documents for the lender to check your finances, such as W-2 or 1099 forms to verify your income. They’ll also perform a hard credit check.

Pre-approval usually takes longer than pre-qualification, typically anywhere from a week to ten days.

After your information has been verified and approved, you’ll be given a letter of pre-approval that details your specific loan amount. While pre-qualification is only an estimate of how big of a loan you could get, pre-approval is the official amount.

You’ll also be given other information, such as your interest rate, expected monthly payments, and closing costs.

Once you’ve been pre-approved, you can start looking at homes. In fact, many realtors won’t show homes to their clients until they get pre-approved. 

In addition, getting pre-approved gives you a leg up with home sellers. Sellers will see that you’re serious about purchasing their home, not just browsing and potentially wasting their time.

It’s important to note that even though your lender will pre-approve you for a specific amount, this doesn’t mean that you have to use all of it. Instead, you can use your pre-approved loan amount to help establish your budget and guide you as you look for homes.

Do You Need Both Pre-Approval and Pre-Qualification?

Neither pre-approval nor pre-qualification is required. However, pre-approval comes with many benefits that can make your home-buying journey easier. 

Home sellers will be more likely to take your offer seriously and choose you over the sea of other buyers. It will also make it easier to work with an experienced realtor.

For these reasons, it can be a good idea to seek pre-approval from a lender as soon as you’re ready. Pre-qualification, on the other hand, is usually only helpful if you’re early on in the process and are looking for a general idea of what loan amount you can expect.

Buy a Home in New England With Our Real Estate Team

Once you understand the difference between pre-approval vs. pre-qualification for mortgage applications, it becomes easier to plan your home-buying journey.

Be sure to work with an experienced realtor if you need more guidance throughout the process. They can answer any of your real estate-related questions and point you toward a lender you can trust. 

At Your Home Sold Guaranteed Realty — The Nathan Clark Team, we’ve been serving home buyers and sellers in New England for over 21 years. This has allowed us to develop an extensive network of lenders and other preferred partners that we recommend to all our clients.

In addition, our years of experience have led us to understand the ups and downs of the market better than our competition. This makes us the best choice for home buyers who need more guidance when it comes to buying a home.

On top of that, we also offer several buyer’s guarantees that protect our clients’ interests. These include our Exclusive Buyer Protection Plan and Buyer Cancellation Guarantee.

To learn more about working with our real estate team, give us a call at 401-288-3557 or fill out the form below for more information.

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Nathan Clark $ 39 Cedar Swamp Rd, Smithfield RI 02917 401-288-3557

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