Pre-Qualification vs. Preapproval Mortgage Letter.
Before starting your search of homes it is best to know how much you can afford to spend on a home.
Your local mortgage lender will be more than happy to run through the numbers for you.
The process of analyzing your income, debt, assets and liabilities will be applied to a formula which calculates how expensive of a home you can afford to buy.
Pre-qualification is an informal discussion between borrower and lender. The lender provides an opinion of the loan amount that you can borrow based solely on what you, the borrower, tell the lender. The lender doesn't verify anything and is not bound to make the loan when you're ready to buy.
Loan preapproval is based on documented and verified information regarding your likelihood of continued employment, your income, your liabilities, and the cash you have available to close on a home purchase.
Some lenders ask that you pay your application and credit fees when you submit your application for approval but many lenders lately have begun to recognize that home buyers don’t want to put up any cash before they have actually agreed to purchase a home. Some have lenders will defer all fees until the home buyer is ready to schedule a closing, others simply ask for a small upfront fee.
More and more sellers are favoring the preapproval letters vs the pre-qualification letters and thus might make a buyers offer more favorable in a multi-bid situation.