Prequalified vs. Pre-approved Mortgage Loans
Today we will discuss the mortgage process and the difference between being prequalified for a mortgage and being pre-approved for a mortgage loan. When deciding to buy a home, consulting with a mortgage broker is a good first step. Consulting with a mortgage broker from the very beginning will give you a financial snapshot of your budget and what price range you should be targeting for your new home. The broker will also be able to guide you through the whole process from prequalifying to getting pre-approved to closing on your new home.
Here are the differences between prequalifying and getting a pre-approved mortgage:
- Prequalifying for a mortgage: think of prequalifying for a mortgage as a dry run of the process. Your mortgage broker will take information on your income, credit, assets, and debts to estimate how much of a mortgage you can afford. The process is quick, usually free but non-binding. It also helps the mortgage broker gauge what mortgage options are best suited for your situation. Although this process is not binding, it does give the seller an idea if you can afford the home.
- Pre-Approved for a mortgage: Being pre-approved for a mortgage is going through the actual mortgage process and getting a conditional commitment letter from the lender. You will fill out an application form, pay the application fee, and go through the underwriting process. The lender will give you a specific mortgage amount that you are approved for. This puts you at an advantage not only when shopping for a new home but when you put an offer in on a home. Sellers will know that you are ready to go and financially approved to buy their home.
Both processes assists your realtor in showing you homes that are within your financial reach. Being pre-approved does give a concrete edge over being prequalified:
- It gives your realtor negotiating power especially if there are multiple offers on a home.
- Some sellers require it before even giving permission to show their home. This is especially true in a sellers market.
- Saves time and frustration for you, your realtor, and a seller by knowing what you can afford.
For more information on buying a home or selling your home, call our office to speak with one of our Realtor Associates: 609.492.2256