Pre-Qualified vs. Pre-Approved

When thinking of buying a home, you may hear the words pre-qualified and pre-approved thrown around. It’s important to know the difference between these so you can make buying a home much easier.

Pre-Qualified for Buying a Home

Pre-qualified gives you a roundabout figure of how much you can afford. This can help you eliminate looking at homes that you won’t be able to get a mortgage for.

Pre-qualification is quite simple. You can do it over the phone, via email or in person. All you have to do is provide some financial information such as your income, assets and your debt amount. Your credit report will not be analyzed at this time.

Pre-Approved for Buying a Home

Pre-approval will provide you with a set amount of how much you will be able to get a mortgage for if you settle on a home. You will be able to know about how much your interest rate will be and receive a letter that shows that you will be able to afford a home at or below the pre-approved amount.

The process of pre-approval involves much more investigation than pre-qualification. You will have to fill out an application and provide statements and documentation of your income, assets, and debt. The lender will pull your credit report to find out what your credit rating is.

Sellers favor potential buyers who are pre-approved for a mortgage. If you are buying in a seller’s market, it’s best to be pre-approved so you have a better chance of entering into a contract. A seller will trust a buyer who is pre-approved over someone who isn’t because it’s insurance that the buyer will be able to get a loan for the amount of the house.

Buyer advice: Don’t get pre-qualified unless you are just curious about how much you can afford. If you are serious about buying, get pre-approved right from the start of your home search.

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