What is the difference between pre-qualification and pre-approval?
Pre-qualification is a term used by lenders that indicates you have completed an application form and that you will most likely be approved for a home loan. Notice that it does not indicate that you are approved only that you will most likely be approved. A pre-approval indicates that you are approved because your application and corresponding documentation was reviewed and approved by an underwriter. The final approval, however, comes when all the paperwork required such as title, appraisal, and insurance is received and verified by the underwriter. Please note this important fact: if your financial situation should change before the closing date (for instance you purchase a vehicle, furniture, or appliances) it could change your approval status to a denial. Speak with your lender about any purchases you are thinking about making during your approval process.
Pre-qualification is when a prospective buyer discloses, either verbally or by providing documentation of, their income, assets and credit so that a lender can determine how much a borrower will be likely to afford in loan payments. A pre-approval involves an underwriter and is a more formal review of your credit and income. A pre-qualification will commonly only provide you with an idea of what you can afford while a pre-approval will actually guarantee you a loan of a certain amount.
Pre qualification is when a prospective buyer discloses, either verbally or by providing documentation of, their income, assets and credit so that a lender can determine how much a borrower will be likely to afford in loan payments. A pre approval involves an underwriter and is a more formal review of your credit and income. A prequalification will commonly only provide you with an idea of what you can afford while a pre approval will actually guarantee you a loan of a certain amount.
Both pre-approval and pre-qualification are generally for purchases and can be obtained before you look for a property. To pre-qualify, the lenders or the mortgage companies will issue you a pre-qualification letter based on your provided data. To pre-approve your credit will be verified by up to 3 credit sources. All your supporting documentation will also be verified. Due to stringent verifications, pre-approval takes longer than pre-qualification. Usually, if the rate and cost is guaranteed, pre-approvals have a time limit. They are also conditional on the terms of the offer and any change in your income or employment, and subject to having the property appraised.
