Read Time: 4 Minutes|
November 3, 2021
Pre-qualification, pre-approval, pre-what-do-I-need? When it comes to the mortgage industry, there are many terms that are mistakenly used interchangeably, when in fact, they don’t mean the same thing. We’re here to provide some clarity and give you an understanding so 1. You are knowledgeable and 2. You have an idea about whether you’re ready to for a pre-qualification or pre-approval.
So, you want to know how much house you can afford? A pre-qualification is the most basic way a loan officer can guestimate the loan amount you may qualify for. You provide the loan officer with personal information and documents (like income, current debt, name, address, etc.), without the loan officer verifying anything.
Short answer: Yes. Similar to when you apply for a loan to purchase a car, or any other loan, a credit inquiry is typically required to review your credit history and score. A credit pull results in a minor drop in your score.
By getting pre-qualified, you’ll have a solid understanding of your finances as you prepare to make an offer on a home. Personalized service from our loan officers takes the guesswork out of the number-crunching process for you! Get pre-qualified today!
The process is simple and straightforward. You can fill out a form online or call a loan officer to get started. In most cases, you can complete your pre-qualification steps in less than an hour. The best part is, you receive a pre-qualification letter, which shows you’re serious and qualified to a home seller (because you’re already working with a lender!).
A pre-approval is one step further than a pre-qualification. When you are pre-approved for a loan amount upfront, your information is reviewed and verified at the beginning of the loan process. By having the file underwritten before an offer is submitted, closing is faster and easier.
Short answer: Yes. Since a pre-approval entails a lender verifying all your personal information, the credit pull may result in a minor drop in your score. On the plus side, as you make mortgage payments over time, borrowers typically see an uptick in their score!
If you’re house hunting in a competitive market or have a particular home in mind, a pre-approval can put you at a competitive advantage. With a pre-approval letter, a seller will know you’re working with a lender who has confirmed that you’re a serious buyer and can afford their home!
Short answer: The industry typically likes to see pre-approvals stamped within the last 3 months.
According to REALTOR.com, “In three months, your financial life can change drastically. You could lose your job, buy a car, or do plenty of things that might affect your home-buying prospects. So, lenders and sellers alike will just have a hard time trusting a pre-approval letter that’s more than a few months old.” If you think you need a longer timeframe, you can work with your loan officer and request a longer timeframe to be outlined on the pre-approval letter.
Once you get in touch with a loan officer, you provide basic information in addition to documents for proof, so everything from income to assets can be verified. The team will remain in touch with you, reaching out should they need any additional documentation. Once everything is cleared, you receive your pre-approval letter!
If you’re still unsure where you stand in the home buying process, or whether you should get pre-qualified or pre-approved, know that you can always reach out to our loan officers! They’re happy to help you get on the path that makes the most sense for you. That’s what we’re here for!