Pre-qualification and Pre-approval: Do You Really Need Both?

There is a Difference

What kind of mortgage you can afford and what kind you can get are important things to know when you begin the home-buying process. You might have a ballpark price range for your next home, but you run the risk of setting your sights too high—or too low—without some additional legwork. Narrow down your range by getting pre-qualification and then pre-approval.

The Difference

Pre-qualification (sometimes abbreviated as ‘prequal’) is a basic overview of a borrower’s ability to get a loan. You provide all the information, without any kind of paperwork to back it up.

Pre-approval is more in-depth. The lender will look at your bank statements, credit score and other information to demonstrate your financial capability. Neither is a guarantee you’ll get the loan, but a pre-approval is more reliable and more favorably viewed by REALTORS® and potential sellers when you start home shopping.

So why get pre-qualified?

  • It’s quick and can be done online or over the phone
  • You’ll know if you can afford a mortgage
  • It can give you a basic idea of what kind of mortgage you can get

A Good Idea, Not the Final Step

While pre-qualification is relatively easy, don’t rely entirely on that information. Mistakes can be made and discrepancies can and will be found during the pre-approval or the final approval process.

Being pre-approved is not a sure-fire way of obtaining a loan, either. For example, if you are pre-approved one month, but then you take out a loan for a new car next month, you can damage your ability to get a mortgage. You do not want to change careers, spend too much money or take out loans during the home-buying process. If you do, you can hurt your loan eligibility.

While being pre-qualified and pre-approved won’t guarantee you a loan, it’s recommended you do both. At the very least, get pre-approved. Many REALTORS® and sellers won’t consider you as a strong home-buying candidate without a pre-approval letter.

So when you’re looking for a new home to buy, it’s in your best interest to do the following:

  • Get pre-qualified
  • Get pre-approved
  • Shop for a home based on your pre-approval amount
  • Apply for the loan

If you follow these steps in order, it can save you a lot of time and aggravation during the mortgage loan and home buying process.

Retrieved From:

About madeehr1213

Burlington County Real Estate Sales and Solutions – Michael “Mike” Deehr, REALTOR® Associate, USAF Retired EXIT Realty is the areas fastest growing real estate firms. My team and I specialize in helping buyers and sellers invest in real estate property and homes in Southern New Jersey area including Medford Township, Medford Lakes, Evesham Township, Marlton, Southampton, Vincentown, Tabernacle, Lumberton, Eastampton, Westampton, Shamong, Mount Laurel, Hainesport, and the surrounding areas. (609) 714-EXIT (3948) Office (609) 284-3693 Direct
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