FAQ: Pre-qualification vs. Pre-approval
Many times these 2 terms are used inter-changeably. However, both terms mean very different things.
Pre-qualification
This is an estimate of how much home you can afford based on information you provide to the lender. This is usually a quick process and the lender does not verify the information you provide.
Pre-approval
During the pre-approval process you complete a formal loan application and provide the lender with the documentation necessary to verify your financial status. At this time you will provide proof of income, bank statements, etc and a credit check will be completed.
At this point the lender will be able to give you a specific mortgage amount for which you qualify and be able to give a good estimate of potential interest rates.
A pre-approval is a more attractive status to a seller because the seller knows that your financial information has been verified by the lender.
Neither pre-qualification nor pre-approval is a commitment by the lender to provide a mortgage. Final mortgage commitment is dependent on appraisal of the home and a re-check of your credit and financial information.
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