How is loan prequalification different from loan pre approval

how is loan prequalification different from loan pre approval

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.

Related Articles:

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.

Source: mortgage-x.com

Category: Credit

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