Lending Language Lessons
December 20, 2020 | Exodus Realty
Pre-Qualified vs. Pre-Approved: What’s the Difference?
If you’re in the market for a new home and know you’ll need a mortgage, you may want to start your search by getting pre-qualified. When you talk with a lender in the early stages of your home search, the lender can give you a general idea of what you can afford based on some general questions on income, down payment, debts, etc. Getting pre-qualified before starting the house search can also save time and keep the house hunt real. No one wants to tour a home, fall in love with it, and THEN find out it’s out of your price range. It’s important to note, however, that getting pre-qualified does not guarantee you’ll get a loan.
Pre-approval is needed to be guaranteed a loan. Once you’re pre-approved, you’ve got a written commitment for financing from a lender. Pre-approval requires that you produce all the paperwork to back up your numbers. Your lender will request W-2s and tax returns; will run a credit report and credit score; and do other research to determine how much he is willing to finance you. At this stage the lender is looking for reasonable proof that you WILL pay your loan back. Pre-approvals do expire, however. Most are good for no more than 120 days.
For more information on getting pre-approved for your new home, check with your real estate agent for guidance and suggestions.