The Home Buying Process
Step 3 Of 6
Pre-Qualifed or Pre-Approved?
Pre-Qualified
Getting pre-qualified is the initial step in the mortgage process, and it's generally fairly simple. You supply a bank or lender with your overall financial picture, including your debt, income, and assets. After evaluating this information, a lender can give you an idea of the size of the mortgage for which you qualify. Pre-qualification can be done over the phone or on the internet, and there is usually no cost involved. Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.
Pre-Approved
Getting pre-approved is the next step, and it tends to be more involved. You'll complete a mortgage application, then supply the lender with the necessary documentation to validate your financial background and credit. Typically at this stage, you will not have found a house yet, so any reference to "property" on the application will be left blank. From this, the lender can tell you the specific mortgage amount for which you are approved. You'll also have a better idea of the interest rate you will be charged on the loan.
Getting Pre-Approved
When you find your dream home, you can present the seller with your pre-approved loan document, showing them that not only are you serious about buying their house, but you've already been pre-approved for financing.
It could make the difference between getting the house you want or watching some other bidder step in with a pre-approved loan and snatch that house away. Pre-approval is good for 120 days and depends on the appropriateness of the property you want to purchase. Fees, like credit reports may apply.
