Pre-Qualified Vs. Pre-Approved - What's The Difference?

Pre-Qualified Vs. Pre-Approved - What's The Difference?


The Scoop on Pre-Qualified

Getting pre-qualified is the initial step in the mortgage process, and it's generally fairly simple.  You supply a bank or lender with your overall financial picture, including your debt, income and assets.  After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify.  Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.

The Scoop on Pre-Approved

Getting pre-approved is the next step, and it tends to be much more involved.  You'll complete an official mortgage application and then supply the lender with the necessary documentation to perform an extensive check on your financial background and current credit rating.  From this, the lender can tell you the specific mortgage amount for which you are approved.  You'll also have a better idea of the interest rate you will be charged on the loan.

With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level.  This puts you at an advantage when dealing with a potential seller, as he or she will know you're one step closer to obtaining an actual mortgage.
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Real Estate Buying Tips

10 Commandments Home Buyers Must Follow

Buyers can sometimes forget with all the excitement surrounding the buying of their new home to follow these Commandments:

1.  Thou shalt not change jobs, become self-employed or quit your job.

2.  Thous shalt not buy a car, truck or van (or you may be living in it)!

3.  Thou shalt not use credit cards excessively or let your accounts fall behind.

4.  Thou shalt not spend money you have set aside for closing.

5.  Thou shalt not omit debts or liabilities from your loan application.

6.  Thou shalt not buy furniture.

7.  Thou shalt not originate any inquiries into your credit.

8.  Thou shalt not make large deposits without first checking with your loan officer.

9.  Thou shalt not change bank accounts.

10.  Thou shalt not co-sign a loan for anyone.

If you are in the process of buying a home, remember that your credit must not change or be affected in any way until you actually sign the paperwork and get possession of your new home.  Lenders will not only look into your credit when you first get pre-approved, they will check it again (and sometimes again and again) before they let you sign the mortgage.  If you want to buy new furniture for your home or change jobs, just be patient.  There will always be time to do it after the closing.