If you’re buying a home, you are bound to come across the terms pre-approval and pre-qualification when searching for mortgages. Both of these refer to determining the estimate amount of mortgage you would receive before an offer is made on the home. Although these do sound similar, they are entirely different things. Here is the difference between the two:
This is the opinion of the lender, about whether you would qualify for the mortgage funding or not, as well as the estimation of the amount you would be eligible to qualify for. The lender offers this in the form of a certificate or a letter, but this is not contractual.
In pre-qualification, the lenders don’t offer a guarantee on the amount of loan or the loan approval. Even though it is great that the lender states that you would be qualified, it is essential to bear in mind that this is merely the ‘opinion’ of the lender and is not a guarantee.
Pre-qualification is still helpful as numerous sellers are still going to take you seriously when you have an estimation of the loan amount. This is only an initial step and it also comes with a downside. This is that the estimation offered by the lender is based on the information provided by you. All the information is not verified. Generally, lenders don’t even verify your credit score. So, being qualified is not always a realistic assessment of your eligibility for a loan.
This is almost the same as pre-qualification, except for the fact that all the information provided by you is first verified by the lender. And this makes a huge difference. The lender ensures that the information you have provided is accurate and the entire process is almost the same as when you actually apply for the loan. Not just your credit score, but other relevant information is also verified, including your employment history.
Once the information is verified, you will be issued a certificate by the lender promising the loan. However, this still doesn’t guarantee that you will receive the loan with the same terms and rates as per the certificate. Each pre-approval certificate comes with certain disclaimers like changes in credit score or employment.
Whether you are looking to buy a house in Kansas City, Shawnee, Overland Park, Leawood, or even Lees summit, sellers typically don’t give much consideration to offers of potential buyers who haven’t been pre-approved or pre-qualified for the loan.
Credentials: I have 20 years of experience in the mortgage industry, and have spent my entire career in lending. I have also purchased and financed 4 homes, so I know what it feels like to be on the other side of the table. Everyone has a story – I would love to hear yours! Email me or Apply Online
Services: Residential mortgages, 1-4 units, conventional, FHA, VA, USDA, Jumbo, Medical professional loans, portfolio products, owner occupied, 2nd homes, and investment properties.
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