Shopping for houses can be fun, but putting together the financing to buy that house with the Pinterest-worthy kitchen seems…complicated. A good first step? Getting an estimate of how much you may be able to spend and showing sellers that you’re a serious buyer. That’s where prequalification and pre-approval can help.
So let’s breakdown the difference between prequalification and pre-approval and when to do which.
Getting prequalified at the start of your home-buying journey is a quick, easy way to see how much you may be able to qualify to borrow for a mortgage. All you need to do is give your lender some basic financial information like your estimated household income and debt and you’ll get your estimated price range in minutes online.
And depending on the type of prequalification the information you provide may not go through the process of getting verified by the lender, so it may not affect your credit score. But it’s also wise to recognize that the amount you may qualify to borrow may be more than you’ll want to spend (so you have money left over to upgrade the washer and dryer or buy new furniture, for example).
When you get pre-approved, on the other hand, the lender is giving you approval for a specific loan amount under certain conditions. You’ll give your lender more detailed financial information, like pay stubs, bank statements and tax returns, and they’ll do an in-depth review of your financial situation to determine the loan amount and terms they’ll agree to. Because the process is much more detailed, it takes more time too – up to a week in some cases.
Pre-approval can help you in the home-buying process by allowing you to act quickly when you find the perfect home and proving to the seller that you have the resources to make the purchase. And if a seller’s getting multiple bids, having a mortgage pre-approval can help you stand out from the rest.
An experienced mortgage loan officer is just a phone call or email away, with answers for just about any home-lending question.
Learn about annual percentage rates.
See how much you’ll want to spend.
Learn about the mortgage process.