There is a major difference between pre-qualified and pre-approved mortgage. Many people often mistake and misunderstand the two different terms; most of them think that pre-qualifying for a mortgage gives them the green light to acquire a home loan. However, they couldn’t be further from the truth.
So, what does pre-qualified for a mortgage mean?
Pre-qualification is the first step in the mortgage process. So, what happens in this process? Basically, in this process, you provide reports of your assets, debts, and income to the bank or lender. You have to show them your financial position.
The bank or lender then reviews your reports, evaluates your creditworthiness, and gives you an idea of the size of the mortgage for which you qualify. In the simplest of terms, the pre-qualification letter gives you an approximation; it is not a promise by any means. Hence, you shouldn’t be under the false impression that you are receiving loan simply because you have pre-qualified for a mortgage. The process of pre-qualification can either be done over the phone or on the web. And, in most cases, you can get pre-qualified for free.
After the lender reviews your financial position, he/she explains your mortgage options and suggests the option that is best suited to your situation. The pre-qualification process, however, doesn’t include an analysis of your credit report or scrutinize your ability to buy an abode.
The pre-qualification procedure doesn’t take much time. A pre-qualified amount is just a rough, but close estimation of the amount you can expect to be approved. A pre-qualified buyer is not the same as a pre-approved buyer; pre-approved buyers are investigated and scrutinized more thoroughly.
So, what does pre-approved mortgage mean then?
A pre-approved mortgage is similar to a pre-qualified mortgage. However, the pre-approved mortgage process requires proper documentation and verification of your assets, income, and debts. In addition to that, the procedure also requires a credit check.
The pre-approved mortgage procedure requires you to be more involved. You will have to pay an application fee while submitting your official mortgage application, submit verified documents of your financial background, and allow the bank or the lender to perform an extensive check on your present credit rating and financial situation. Upon completion of this procedure, the bank or lender will be able to tell you the exact mortgage amount for which you are approved. And, you will also know the loan interest rate. When you get pre-approved, you get a conditional contract for a specific mortgage amount, giving you the luxury of hunting for houses at or below the price level.
Being pre-approved for mortgage undoubtedly gives you an advantage when dealing with home sellers. The sellers will be aware that you are as close to acquiring a mortgage as can be.
For more information on home purchasing options, you should contact one of the agents with Team Couch. Team Couch offers exceptional service to all clients in the North Mississippi real estate market.