Pre-Approval Vs Pre-Qualification
Very shortly after you have made the decision to purchase a home you will need to talk to a mortgage professional about your new mortgage. This is an important first step in determining how much you can really afford and whether you qualify credit wise for a mortgage.
Over the years the terms pre-approval and pre-qualification have been used as if they are interchangeable. They are not. They mean two entirely different things and should not be confused. Let's take a look at the two.
Pre-Qualification
Getting pre-qualified, too be frank, is almost a waste of time. In its simplest form a mortgage expert takes the information you give to them and without checking into it, offers you his opinion on what you can afford. No credit check has been done. No verifying your income, nothing is done to verify your statements. It is only an opinion on what you can afford. It is not a commitment on anyone's part to give you a mortgage. Usually the whole process is done while sitting in the mortgage experts' office. Many people have been very disappointed when thinking they have mortgage make an offer on home only to find out they're wrong.
Pre-Approval
On the other hand a pre-approval is a commitment to give you a mortgage usually with the condition the house must be acceptable. In this case they do a full credit check, verify your income, gather proof of your statements. In most cases they will offer you a letter stating exactly the terms and conditions of your new mortgage. This process can take anywhere from several hours to a few days.
When it is time to search for your new home be sure to get pre-approved and not pre-qualified.
Jamie Woodend
Sales Representative
Remax a-b Realty Ltd Brokerage
88 Wellington Street
Stratford, Ontario, N5A 2L2
519-273-2821 ext 229 Office
519-949-0345 Cell
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Very good Jamie. As a mortgage broker, I must educate my buyers on this also. I go one step further and tell them that a true pre-approval means the lender has the loan file and we have run the "automated approval," often known as "DU." It is a lender document which can then be given to a seller or Listing Agent which is proof that the borrower has been pre-approved.