Reader question: We're hoping to buy a home in the future. A buddy of ours who's a realtor said we should get pre qualified for a home mortgage. What does the pre approval process involve? How's it different from pre-qualification? . You are not alone in wondering this. Last month, over 4, 000 individuals reached our web site by doing Google searches for pre qualified and pre-approval phrases. Typically, you'd do that before shopping for a house. The idea is to obtain a rough idea what you really can afford, and after that store within these parameters. Later, after you have made an offer to purchase a house, you'd return to the same lender for final acceptance.
This is normally how it works, anyhow. Here's a broader explanation: The pre-acceptance process will, in fact, determine two things.
First, the lender will determine if you are even qualified for a house loan. You must meet their minimum standards for credit rating, debt ratios, income, etc. They'll also give you a pre-acceptance letter to utilize during the house hunting process. We'll talk more about it letter a bit later. Notice: Getting pre-qualified for a mortgage isn't a guarantee. You may face a secondary review process in the future, so as to receive your final acceptance. There's a lot more subscription involved with the final approval. On the Wells Fargo web site, there is a page where one can fill out an online pre-approval application.
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Being pre approved for a house loan doesn't guarantee you will get the loan. And that does not happen until you have made an offer to buy a house. At that stage, you'd give your creditor a copy of the purchase contract so they can evaluate you and the property. Don't let the Terminology Fool You I said final approval in the last paragraph. Here is the difference: Pre qualification, by means of this process, you'd provide the lender with very basic details about your financial situation. This will include your monthly debts and income. Based on this, the lender will yield you a ballpark amount they could be willing to lend you.
Ballpark is the key word here. Learn more - Pre-approval, That is a more in-depth version of pre-qualification. Once you get pre qualified for a mortgage loan, the creditor will in fact start to verify your financial background. This is what sets it apart from pre qualification. They'll request a wide range of documents from you, like tax records and bank statements. They'll also check your credit rating. The pre acceptance process gives you a more precise concept of how much you can borrow. That is why I recommend it so strongly. Approval, This is the final acceptance by the lender. You will also go through an extensive underwriting procedure that could take up to 1 month.
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