You may have heard the term pre-qualified and assumed that it was the same thing as being pre-approved. Although similar, they are actually two different things.
Getting pre-qualified: Involves sitting down with a lender in order to get an idea of how much money you can borrow. It is only informational.
- During this meeting you would supply the lender with data such as your income, assets and debt and the lender in turn would give you an idea of how much you could borrow, types of mortgages, etc.,
- Getting pre-qualified doesn’t mean the bank will loan you that amount, but it can give you an idea of how much you can expect to be given once you get pre-approved.
Getting pre-approved for a mortgage: Means that a bank or lender has investigated your credit history and determined that you would be a suitable candidate for a mortgage.
- Pre-approvals might only be good for a certain amount of time but they usually signify that a lender is ready and willing to lend you money.
- It’s a big step in showing sellers that you are serious about buying a house and that your offer should be treated accordingly. In a competitive market, some sellers won’t even entertain offers from buyers unless they have a pre-approval letter in hand.
- The major benefit of getting pre-approved is that when you find a place you’ll be able to move quickly. Once you make an offer, you won’t have to scramble for financing since you’re pre-approved.