Knowing the Difference Between Being Pre-qualified & Being Pre-Approved

Knowing the Difference Between Being Pre-qualified & Being Pre-Approved

  • Cheryl Lynch
  • 12/2/21
When you start your home-buying journey, there are many things to consider. It’s not easy to absorb everything in a short time, from concepts like earnest cash to closing costs.
Of all the information you need to be aware of, it is important to understand the difference between pre-qualified and pre-approved for your mortgage.

How Your Mortgage Application Status Matters

When it comes to real property, it has always been a smart idea to make a strong offer. This is even more important when there is a shortage of inventory and buyers.
Multiple offers are sometimes possible. Sellers will weigh all the offers to determine if your offer is sufficient to sell their house. Strong offers are those that have all the obstacles removed. This could be a weak offer for sellers if your house needs to be sold before you can make an offer.
A weak offer does not necessarily mean a poor offer. It’s just an offer that seems difficult to get to the final table.
It is too risky to pay for the potential rewards. When it comes to negotiations, having the right type of mortgage application status is crucial.

Mortgage Pre-qualification Versus Mortgage Pre-approval

Lenders will ask you questions about your income, assets, credit score, and expenses when you first meet them. The lender isn’t just looking for information; they want to help you determine how much home can be afforded and which programs may work best for you.
Sometimes these lenders will send your application elsewhere because their partner lending institutions or banks are unable to help you. However, in most cases, they’ll provide a pre-qualification letter.
Pre-qualification is based largely on your word about your income, expenses, and it does not guarantee that you will lend. It is hypothetical among many. If you have the money to purchase this house, and your credit score is correct, rates are stable, and you meet these guidelines, then you should be able to buy it. It is clear that this would make it difficult for sellers to put their faith in.
Pre-approval on the other hand shows that you have gone through additional steps to get the best mortgage approval without having a house. The final approval also includes the house you select, but how it is calculated depends on the loan program.
You will need to submit income documentation, authorization for the lender to pull a complete credit report, and details of any assets or liabilities that aren’t listed in your credit file to get pre-approved.
Pre-approval is not instant. It requires more review and you will need to select a loan program to be approved.
This extra effort shows potential sellers that you are willing to put in the extra effort to make sure you can close the deal when it comes. This is the type of buyer that sellers want to see.

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