Many homeowners are unaware of the differences between getting pre-approved and pre-qualified. Today, I explain the differences, so you can make the right decisions before embarking on your home buying venture.
To get get a letter of pre-qualification, your lender will briefly review your assets, your income, and your credit score. They’re not going to pull your credit; rather, you’re just going to describe your assets, income, and credit. The lender will then take these numbers, which are not always accurate, and give you a certificate of pre-qualification and describe some of the loan options you might have. By no means is this a guarantee that you will be able to get a mortgage, and we’ve seen some unfortunate circumstances where the buyers ultimately don’t qualify for the loan amount they initially thought.
This process is a bit more complicated, but it’s much safer than getting a pre-qualification. Your lender will verify your assets, income, employment, and credit in order to get an in-depth understanding of your financial standing. This is a much better approach to starting the home buying process because you’ll have a much better understanding of what you can afford.
Obviously, we highly recommend getting pre-approved before you even begin your home search. Your lender will be able to submit your fully verified information to their underwriting department, and you’ll get a clear picture of what you can actually afford.