What's the difference between pre-qualification and pre-approval? In the world of real estate the terms "pre-qualification" and "pre-approval" are often used interchangeably. But they have different meanings.
What is a pre-qualification. A pre-qualification is an estimate of how much you can afford in a mortgage payment. It is based upon the information you provide, and is subject to the approval process, including further details such as a credit report, appraisal, and income verification. The information you provide won't be verified as part of the pre-qualification process.
What is a pre-approval? A pre-approval is a firmer commitment on behalf of the mortgage company and is a more formal process which includes a credit check and even an employment verification. During a pre-approval the mortgage company does all the work of a full approval. except for the appraisal and title search. A credit report will be obtained by the lender to verify your monthly payments on installment loans and credit cards, and to check whether you have a history of making your payments on time. You will also need to provide paystubs and
W-2 forms (or tax returns if you are self-employed), plus statements from savings and investment accounts to verify your assets. If you've been pre-approved for a loan, you can shop for a house with more certainty and less anxiety because you won't be going through the whole process worrying about your mortgage approval.
However neither a pre-approval nor a pre-qualification means you are guaranteed a mortgage. Lenders still need to look at property appraisals, verify information, and in many cases, re-check credit before agreeing to make a loan.
For additional information, speak with local brokers and lenders. You may visit our Mortgage Lender Directory to find lenders in your local area.
Prequalification Read about the prequalification process and why it is recommended to get pre-qualified before you start to shop for a home.
Loan Approval It is important to understand what and how lenders verify when considering to extend loan. Discover steps a lender follows to process and approve your application.
Types of Mortgage Loans Review characteristics of all the basic loan programs available today.