The home-buying process is a journey with a key factor being securing financing. As part of financing, we are often asked, “What’s the difference between mortgage pre-approval vs pre-qualification?”
First, understand the decision to buy a home is an exciting process that doesn’t need to be rushed. It’s a journey we will guide you through considering where you are today in your financial position. We assist you in identifying your future goals, and then map out a plan that makes your dreams reality. As you step into homeownership and real estate investing, your financial awareness, planning, and preparation are key. We got you!
One of the essential steps in the home-buying process is securing financing. Before you start shopping for a home, it is crucial to understand the difference between mortgage pre-approval versus pre-qualification. So, what is mortgage pre-qualification?
Mortgage pre-qualification is a preliminary assessment of your creditworthiness and financial situation. It is an informal process where a lender reviews your income, assets, and debts to determine how much you could borrow. Pre-qualification is typically a quick and straightforward process that can be completed online or over the phone. Alternatively, mortgage pre-approval takes a bit longer.
Mortgage pre-approval is a more formal process that thoroughly examines your financial documents; tax returns, bank statements, and pay stubs. Also included in mortgage pre-approval is a credit check, which helps the lender determine the interest rate you will be offered. Once pre-approved, you will receive a conditional commitment for a specific loan amount. That loan amount will help you narrow your home search and make a competitive offer.
Benefits of Completing a Mortgage Pre-Approval
While numerous, some of the benefits of completing the mortgage pre-approval process include:
- Know What You Can Afford – Pre-approval for a mortgage provides you with a clear understanding of your budget. You will know exactly how much money you can borrow and your monthly mortgage payment. This information will help you avoid wasting time looking at homes that are outside of your budget and focus on properties that you can afford.
- You Stand Out to Sellers – A mortgage pre-approval letter from a lender gives you a competitive advantage over other buyers who are only pre-qualified or not pre-approved at all. Sellers are more likely to take your offer seriously if they know that you have been pre-approved for a mortgage. A pre-approval letter shows that you are a serious buyer who has taken the necessary steps to secure financing.
- Peace of Mind – Buying a home is a significant investment, and it’s essential for you to have peace of mind throughout the process. A mortgage pre-approval gives you that peace of mind by giving you a clear idea of your financial position. You will know exactly how much you can afford to spend and what your monthly mortgage payments will be. This helps you make more informed decisions throughout the home-buying process and avoid any surprises down the road.
- Provides Buying Power – With a mortgage loan pre-approval letter, you have a clear idea of how much you can afford to spend on a home. This gives you more power to negotiate with the seller, as you can confidently make an offer and have a good understanding of your budget.
- You Can Move Quickly – In a hot real estate market, time is of the essence. A mortgage pre-approval allows you to move quickly when you find a home that you love. You won’t have to worry about waiting for your lender to approve your mortgage application, which could take several days or even weeks. With pre-approval, you can make an offer on a home with confidence, knowing that you have already been approved for financing.
Mortgage Pre-Approval vs Pre- Qualification Takeaway
In conclusion, obtaining a mortgage pre-approval is an essential step in the home-buying process. It provides a clear understanding of your budget, gives you a competitive advantage over other buyers, and allows you to move quickly when you find the perfect home. Mortgage pre-approval is a crucial tool that can help you secure your dream home and make your home-buying experience as smooth and stress-free as possible.
Revival Lending – Certified Mortgage Advisors
At Revival Lending, we are Certified Mortgage Advisors. We will work to design a customized loan to facilitate your goals. We want to earn your business over a lifetime, not just through a one-time transaction. Therefore, we promise to take the time to truly understand your goals and help you map out a plan to use your mortgage and home to reach them. Set up an appointment with us today. I promise you will not be disappointed. Call 714-257-5284 or email us to schedule a complimentary mortgage review today.