When you find you have an opportunity to land your dream home by securing mortgage pre-qualification and pre-approval, it is exciting, because not every buyer has thousands of dollars to buy a home.
To secure a mortgage, obtaining these documents is crucial, among others. On the other hand, pre-qualification and pre-approval are two very distinct things. Here are their different functions.
What does it mean to be Pre-qualified for a Mortgage?
Pre-qualification indicates that a lender has assessed your creditworthiness and determined that you are likely to be approved for a loan up to a specified amount. It is an overview of the financial situation and how a buyer may qualify.
Although the pre-qualification letter is valid in mortgage acquisition, it is usually an estimate, not a guarantee, based only on the information you provide the lender and its assessment of your financial prospects.
What can a Pre-qualification do?
- The evaluation is based on the information you’ve supplied.
- It may not consider your current credit record or go beyond your declarations about your income, assets, and liabilities.
- It can be beneficial if you have no idea what your existing financial situation can support in terms of a mortgage amount.
- It’ll come in handy if you’re starting to look for a home.
What is a Pre-approval?
A pre-approval is a lender’s preliminary assessment of a potential borrower to see if they qualify for a pre-qualification offer. It entails completing a mortgage application and supplying your Social Security number to a lender for them to do a hard credit check on you.
If your loan is solely conditional on the appraisal of the home you choose, assuming that your financial situation does not change before closing, that is pre-approval.
What can a Pre-approval do?
- It can bring you as near to being a cash buyer as possible, giving you a significant advantage in a competitive market.
- Bidding wars against all-cash offers have been won by pre-approval letters paired with clean contracts without contingencies.
- Your offer stands out among others because of its dependability and simplicity.
- “Pre-approval can also provide you an edge in terms of dependability.
While pre-qualification can help you figure out how much a lender is willing to lend you, a pre-approval letter will impress sellers by demonstrating that you have the funds to back up an offer.
What if you still want to know more about your chances of a mortgage loan? A private lender is less-stress compared to a loaning company. If you’re going to qualify for a mortgage loan, you can make enquires with use.