is Pre-qualification and pre-approval the same thing?
“A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life” – Suze Orman
Pre-approval and pre-qualification are two different things. Although getting pre-approved or pre-qualified for a mortgage is not a requirement in the home buying process, it might make the process much easier. So should you get pre-qualified or pre-approved? What is the difference?
What is Mortgage Pre-qualification?
Pre-qualification is a brief process during which the lender goes over the borrower’s financial situation.
Pre-qualification is meant to help borrowers get an estimate of an approximate loan amount they might be able to obtain
Pre-qualification is often verbal and since there is no application in the system, no documentation is verified
Pre-qualification doesn’t guarantee the borrower will be approved for the loan amount quoted, it is just a rough idea of how much you can afford in your current financial situation (and is valid for a short time frame).
What is Mortgage Pre-approval?
Pre-approval is a lengthy and more formal process during which your income, debts and assets are checked in a very comprehensive way
Pre-approval is very similar to a mortgage application where all pay stubs, credit history, saving accounts statements and other relevant documents are taken into the consideration
Pre-approval allows you to identify and resolve issues related to your credit situation.
Pre-approval is usually good for 3 to 4 months
Pre-approval still does not guarantee a loan but it gives a very accurate loan amount you will most likely receive when ready to buy a house.
In most cases when you are serious about buying a property, getting a pre-approval is the best way to go. However, if you are in the early stages of the home buying process and just want to discover your options, pre-qualification might be sufficient. In any case you are now better equipped to make a more informed decision.
