Pre-qualification on a home loan is based on the information you tell the lender and is a rough estimate of how much you can afford. They take you on your word and don’t review any documentation. A pre-approval is a much more comprehensive process. It shows your Realtor and the Seller that your lender has reviewed your credit, income, assets, taxes, and more. A pre-approval means you are ready to purchase a home.
What is the Point to Pre-qualifying?
Now that you know the difference between pre-qualifying and pre-approval, you’re probably wondering what the point of getting pre-qualified is. Pre-qualification is usually just an approximation to satisfy your curiosity. If you want to get a home loan, you’re eventually going to have to provide the necessary documentation to the bank for a pre-approval anyway. So it’s often recommended that homebuyers go straight to the pre-approval process. However, if you’re thinking about buying a home and aren’t ready to have your credit run, getting pre-qualified can be a good start.
Why Getting Pre-Approved Is Better Than Getting Pre-Qualified
Pre-approvals carry more weight than pre-qualification, and if you make an offer on a house, it could mean the difference between the Seller accepting your offer, or that from another potential buyer. Remember, with a pre-approval, your lender has actually checked your credit and verified your documentation to approve a specific loan amount. Then, when you’re approved, they’ll give you a pre-approval letter to include with any offers you submit, and an approval letter always carries more weight than a pre-qualification letter.
You’ll Know You’re Home Buying Budget
Getting pre-approved before you begin house hunting allows you to know how much house you can realistically afford and helps you stay within your home buying budget. Knowing this narrows down the options and makes the selection easier.
It Saves You Time
Obtaining a mortgage can be a fairly lengthy process. Getting pre-approved ahead of time shortens the time between contract to close and saves you, your Realtor, and the sellers, valuable time. We all know that time is money, so why not just go ahead and get pre-approved today?
It Increases Your Negotiating Power
In addition to strengthening your offer when compared to buyers that aren’t pre-approved, getting pre-approved may also give you the upper-hand when negotiating the price. If the Seller is anxious to sell, they might be more willing to accept a lower offer from a buyer they’re confident is financially capable of purchasing their home
Get Pre-Approved for a Home Loan with Primary Residential Mortgage
Regardless of whether you are serious about buying a home, or just thinking about it, contact Primary Residential Mortgage. We will help you every step of the way! Contact us today!
Note: Opinions expressed are solely my own and do not express the views of my employer