In the past, you were able to arrange a mortgage loan after the seller had accepted your offer. Now, you need documentation showing that you’re in a position to buy. Many buyers confuse pre-qualified with pre-approved, believing that if their lender pre-qualifies them for a mortgage, it means that they have been pre-approved for a home loan. Not so. The terms “pre-qualified” and “pre-approved” are different, and a misunderstanding may prove disastrous.
Pre-qualified
To get a pre-qualified letter, you need to supply the lender with your overall financial picture, including your debt, income, and assets. This can be simply done with a phone call. With this information, the lender will have an idea of the amount of mortgage you will qualify for. However, this process does not dive fully into all aspects of your credit report, employment, assets, debt, and income it also won’t tell your lender whether you’re actually able to purchase a home without verifying the information.
Pre-approved
Obtaining pre-approval is more complicated. You’ll be required to supply the necessary documentation to complete the lender’s picture of your financial background and current credit rating. From this, the lender can figure out the specific mortgage amount you’re approved for and the best program to fit your specific situation. You’ll also have a better idea of the interest rate on the loan, term, and closing costs.
When you find the right home, you fill in the appropriate details, and the pre-approval becomes a completed mortgage application. Finally, a “loan commitment” is issued by the lender when your application is approved. Then, finally, you buy your home.
If you have questions or are need assistance getting pre-qualified give me a call at 502-882-1609 I am happy to help.