Buying a house is exciting! It's important to know your budget and exactly how you will pay for it. That's where preapproval and prequalification come in. Here’s information about each option and the differences between each option.
Prequalification Vs. Preapproved Loans
Pre qualification is the easier and quicker route. You supply your lender with basic financial information (income, assets, and debts). Based on this, the lender will estimate how much you can borrow. There is no hard credit check. However, there is also no guarantee you'll be approved for a mortgage when the time comes to buy a home. Although a pre-qualification gives you a rough idea of your budget, it is many times only a first step in the house buying process.
Pre-approval is a more in-depth process that involves submitting a formal mortgage application. Your lender will request documentation of your income, assets, and debts.
You will fill out an application and supply your lender with numerous forms and papers. This is extensive in the beginning but helps ease the transaction later on. Getting a pre-approved mortgage can help you save on fees and rates depending on where you shop. Once the process it complete you will receive a letter stating how much the lender is willing to lend you.
The pre-approval process is a more accurate estimate of what you can afford so you can better narrow down your property search. Another plus is that it prevents you from falling in love with houses outside of your price range.
When you're serious about buying a house pre approval will:
- Demonstrate to sellers that you are a serious buyer
- Help in a Competitive market a pre approved buyer may have the upper hand against non-approved buyers.
- Result in Quicker Buying Process
- Give you a Clearer image of your budget
South Shore Real Estate Mortgage Tips
The mortgage process can be overwhelming, learn best practices before you apply. When it comes to choosing a lender, buyers should always shop around and compare offers to ensure you're getting the best deal. Different lenders have different requirements and rates. In either process, the best way to start is to find a lender you trust.
Keep in mind that even if you are pre-approved or prequalified, your lender could still deny your loan application. Once you get approved it's important to not make any big financial decisions that could risk your loan being denied. This includes making big purchases while during the buying process. Stay on top of everything and don't give your lender a reason to say no.
Whether you choose pre-approval or pre-qualification, they are both valuable tools for buyers. Going through either one of these mortgage options helps streamline the home-buying process and gives buyers a clear idea of what they can afford.
Before shopping for a home, buyers should always hire a real estate professional to help guide them through the process. Before choosing a lender, take the time to understand and organize your finances. Click the link below to download a checklist of questions to ask lenders before choosing the right lender for your real estate transaction.