Consumers caught in the excitement of buying a home may feel overwhelmed when it comes time to talk about the particulars.
Purchasing a home is a big undertaking. So, understanding the differences between a pre-approval and a pre-qualification can give Roseville homebuyers the advantage of knowing what to do at each step.
People often mistake the terms “pre-approval” and a “pre-qualification” as the same thing and use them interchangeably. However, they are actually separate steps in the loan application process
A pre-qualification often comes first and is not as binding as a pre-approval. When an applicant receives pre-qualification status, he or she is provided a framework for how much it will cost to finance a home. In contrast, a pre-approval is a conditional mortgage green light that is based on verified documents. It’s more of a sure thing. When a homebuyer presents an offer with a pre-approval commitment, it is far more appealing to the seller.
In order to get a pre-qualification, an applicant must provide the lender with information, including debt, income and asset details. Based on this financial snapshot, the lender gives the applicant an idea of the loan break down.
Because a pre-qualification is a precursor to pre-approval, applications can be completed online. This process can take less than a day. The lender will ask for the information in either verbal or written form. Lenders may also want to know about an applicant’s other financial commitments, including car payments and student loan debt. Lenders may even verify some of the information by pulling a credit report.
Obtaining a pre-approval is more involved. Applicants are expected to submit W-2s, tax returns, pay stubs, bank statements and other financial documents. These pieces of information are used for verification. This phase is done by an underwriter and brings applicants one step closer to fulfilling their goal of owning real estate.
If you have any questions, contact us today!