Applying for mortgage pre-qualification and pre-approval are important first steps in the home buying/financing process. So, to start off our Mortgage 101 series, we’ll bring you up to speed on how these terms differ and what they mean for borrowers.
A mortgage pre-qualification is an estimate of how much the lender thinks you could be eligible to borrow, based on a review of your basic financial information. This can help you determine a price range for the homes you should be looking at. Pre-qualification does not guarantee you will get a loan. The lender is only showing you the loan amount that they believe you could be approved for if everything checks out.
Getting pre-approved is the next step. “Preapproval” means the lender has taken an in-depth look at your financial history and determined that you qualify for a mortgage of a specific amount. You will receive a conditional commitment in writing for an exact loan amount, which puts you in a stronger negotiation position because the seller knows you are capable of buying the house. These are examples of some of the information you will need to provide to your lender :
- Proof of employment
- Proof of income
- Tax documentation
- Place of residence
- Bank account statements
- Credit information
- Monthly expenses
Benefits of Pre-Qualification & Pre-Approval:
The advantage of getting pre-qualified is that you’ll know how much you can afford before you start looking for a home. This way you don’t waste time guessing or looking at properties that are out of your price range. Getting pre-approved enables you to move quickly through the financing process and can give you an advantage when dealing with sellers.