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Mortgage Pre-qualification vs. Pre-approval: What you Need to Know

Purchasing a home is a process, and in the current competitive market, it makes sense to set yourself up for a successful experience. Getting pre-qualified for a mortgage loan proves to be a key advantage.

What is a Mortgage Prequalification?

In simple terms, being prequalified for a mortgage means that a lender has collected your basic financial information, and sometimes have completed a credit check, to give you an estimate of how much house you can afford.

What is Mortgage Pre-approval?

A mortgage pre-approval is one step ahead than mortgage prequalification. For a mortgage pre-approval, you complete a mortgage application. The lender will then verify the information you provide, and will also perform a credit check. If you are eligible, you will get a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount. This pre-approval offer is valid for 90 days.

 What Information Do You Need to Provide?

Pre-qualify

Pre-approval

Employment Information

Copies of pay stubs that show your most recent salary information

Credit Check

Credit check

Basic Information about bank accounts

Bank account number or two most recent bank statements

Down payment amount and desired loan amount

Down payment amount and desired loan amount

No tax information is needed

W-2 statements, personal and business tax returns from the past two years

 

Mortgage Prequalification vs. Pre-approval Comparison

 

Prequalify

Pre-approval

Benefits

You can start looking for houses knowing how much you will be able to afford

You will be ready to make an offer to the seller. It will gain you competitive advantage over other potential buyers.

Process

Provide basic financial information to the lender and get a pre-qualification letter within minutes.

After submitting the required documents for the loan application, you will receive a decision within 10 business days.

Documentation

Need to answer a few questions designed to evaluate your financial situation, plus a credit check

Need a proof of financial information, plus a credit check

Pre-qualification vs. Pre-approval: Which One is Right for You?

For first-time homebuyers, a mortgage pre-approval tends to be more helpful, especially when they are establishing their budget for home buying and need an idea of how much they might be able to afford.

Pre-approval comes out really handy when the homebuyer is ready to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. The seller will take your offer more seriously if you have your creditworthiness and finances verified from a lender.

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Complete our secure credit application and get preapproved to buy a new home or refinance your existing home in as little as 30 minutes.

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Want to know if you prequalify to refinance your existing home? Our expert mortgage brokers are standing by ready to help you get started.

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