Ever hear the adage of not looking at cars or wedding dresses you can’t afford to save you from heartbreak? The same goes for home buying. It’s best to know how much you can afford before you go searching for that dream home, and even more beneficial to work with a lender that can help give you an accurate picture of your financial situation. Let’s talk about the difference between pre-approval and pre-qualification and dive a little deeper into one of the most critical steps of the home buying process.
What is a Pre-Approval?
Pre-approval is a mortgage lender’s conditional agreement to lend a specific amount of money to a home buyer under a specified set of terms. Simply put, a pre-approval helps to give you the price range on the home you can afford.
How It Works
When you want to be pre-approved for a home, you begin by filling out a loan application. Loan applications have traditionally been done on paper, but most lenders now offer an online application to submit everything digitally. During the application, you will enter your personal information, as well as information about your assets and income, and your credit will be pulled. The lender will verify all the information, and if all looks good, you will be pre-approved for a specific loan amount. Pre-approval doesn’t lock you into the mortgage you’re offered, but offers you a more accurate look at the loan you qualify for.
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Pre-Approval vs. Pre-Qualification
The terms pre-approval and pre-qualification can mistakenly be used interchangeably. But be careful! The two mean very different things. A pre-approval is a thorough and accurate look at your financial situation. The information submitted is detailed enough and verified to tell the lender exactly how much of a loan you can afford.
A pre-qualification takes a more shallow approach when looking at your finances. You only have to submit your debt, income, and assets; from this information, the lender is able to tell you if you qualify and how much you might be able to borrow – not as exact or accurate. It’s best to receive a pre-approval before you start home shopping!
Ready to learn more about mortgages and get pre-approved? Visit our Mortgage Resources page or Contact Us to get in touch with one of our mortgage professionals today!
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Why Home Loans Today?
At Home Loans Today, a proud division of FBC Mortgage, our key strategic approach is to prioritize customer value. Saving you money is our top priority – and our approach to lending shows that every day! Through efficient processes, proprietary technology, and aggressive pricing, we gain a competitive advantage over traditional mortgage companies.
We’ll help you navigate the mortgage process, and keep you updated at every step along the way so you know you’re taken care of. Buying a home is one of the most important financial decisions you will make. Understanding mortgages and the home buying process can help make it less stressful, and so can partnering with a mortgage lender you can trust. At Home Loans Today, we’re dedicated to helping our clients finance the home of their dream.
All information presented is for educational purposes only and not intended as financial advice.
