When it comes to mortgage qualification, it’s only natural to feel overwhelmed in the process. After all, you’re going to be faced with a number of terms, options and major decisions when it comes to choosing your mortgage. It’s safe to say that the whole process can feel a little frightening at first.
Of these mortgage-related terms, the two that generate the most confusion are mortgage pre-qualification and mortgage pre-approval. Far too often, these two terms are mistakenly used interchangeably. In reality, the terms are entirely different from one another and pose a number of differences.
To help mitigate the damages, we’re shedding a much-needed light on what the differences are between a mortgage pre-qualification and a mortgage pre-approval. It’s more simple than you might think.
What is a Mortgage Pre-Qualification?
A mortgage pre-qualification is considered to be the first step in obtaining a mortgage. Put simply, a pre-qualification will provide you with a basic idea as to what type of mortgage loan you might qualify for.
The number that is generated is based entirely upon the documents and the numbers that you provide. At this point, there aren’t any systems double-checking your information to verify that it’s accurate. Instead, the pre-qualification is simply depending on the borrower to be honest and accurate in the information provided.
Of course, a mortgage pre-qualification can be accurate in the number that it generates. However, it doesn’t carry enough weight for a borrower to state that they have successfully qualified for a mortgage loan. In order to successfully qualify for a mortgage loan, you’ll have to move onto the second step and obtain an official mortgage pre-approval.
What is a Mortgage Pre-Approval?
After receiving a mortgage pre-qualification, you can now move onto the second step and obtain a mortgage pre-approval.
As compared to the pre-qualification, pre-approval carries significantly more weight to the borrower. With this, you’ll have to supply your lender with a number of official documents. This includes anything from your credit score and your letter of employment to your proof of downpayment and a list of your assets and your debts.
After reviewing your documents, your lender can officially pre-approve you for a mortgage. You’ll also discuss what type of interest rate that you qualify for as well as the other terms of your mortgage.
From here, you’ll be given a conditional mortgage pre-approval in writing. Once you have this approval, you can let your real estate agent know that you’re been pre-approved for a purchase up to that amount.
Which One is Better?
At the end of the day, a mortgage pre-approval is always going to be superior to a pre-qualification. This is because it carries a higher significance for the borrower and actually generates an official loan amount.
Of course, there are perks to getting a mortgage pre-qualification before you move onto the mortgage pre-approval stage. It will give you a simple read as to what type of loan you might qualify for down the road. This will allow you to feel more prepared and less anxious when meeting with your lender for the official mortgage pre-approval.
If you’re thinking of beginning your house shopping journey, the best place to start is by speaking with a mortgage lender. This could be anyone from an official mortgage broker to the loan officers at your bank.
Nowadays, there are plenty of online systems that can generate a mortgage pre-approval in a short timespan. While this can be used to provide you with a basic idea as to what you’d quality for, remember that it’s not an official document.
From here, you can meet with your lender in-person to obtain an official mortgage pre-approval.
Nobul Verified Agents are here to help.