There is a popular misconception among buyers that if a lender pre-qualifies them for a mortgage, they have been pre-approved for a loan. However, these two terms are very different.
Getting pre-qualified is the first step in the mortgage process, where a bank or lender goes over your comprehensive finances. This includes your debt, income, and assets. Pre-qualification does not include credit report analysis nor does it include an in-depth look at your capability to buy a home. This step is simple and can easily be done over the phone or on the internet, typically with no charge.
The purpose of pre-qualification is to allow you and your lender to go over any goals or needs you may have in regard to your mortgage. This is when your lender can explain your mortgage options and advise you on the type of mortgage that would best suit you.
Be aware that your pre-qualified amount is not a set amount. Your pre-qualified amount is just the amount for which you might expect to be approved. Because becoming pre-qualified does not include an in depth analysis of all of your finances, it is not as important as becoming pre-approved.
Becoming a pre-approved buyer is the second step in the mortgage process. This step is much more involved. This is where you complete an official mortgage application, which typically includes an application fee. You will also give your lender the necessary documentation to do an extensive check on your financial background and current credit rating, so that the lender can tell you the specific mortgage amount for which you are approved.
There are some advantages to being pre-approved. First, you will have a better idea of the interest rate you might be charged on your loan. In some cases, you may even be able to lock in a specific interest rate. You will also receive a conditional commitment in writing for an exact loan amount. This will allow you to look for a home at or below that price level.
Pre-approved and pre-qualified are not the same thing. Do not assume you will be granted a loan until you are pre-approved! Get connected with a Mortgage Lender
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