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Pre-qualification vs. Pre-approval
by Joy Breiling
CMR Columnist
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Before you start shopping for your new home it is important to meet with your lender to determine the type and size of new home loan for which you can qualify. Your pre-qualification and/or pre-approval lets your real estate agent and potential sellers know that you afford to purchase a new home.
Pre-qualification - Your First Step to Financing a Home
Pre-qualification is the first step in obtaining a new home loan. Pre-qualification involves providing information a qualified loan consultant. This gives your consultant a quick snapshot of your income, debts, and down payment available. Prequalification may also involve pulling a credit report for greater accuracy. Armed with this information, your loan consultant can provide you with an estimate of the purchase price of home you can buy as well as a rough estimate of the mortgage interest rates for your new home loan.
Pre-approval - Solidifying Your Purchase Power
Once you have been pre-qualified, the next step is getting pre-approved. The pre-approval is a written document that indicates that you have the support of a lender to purchase your new home. An underwriter reviews supporting documentation such as your credit report, paystubs, tax returns, and bank statements. Once your loan has been underwritten and approved, you can expect to close on your mortgage as long as the property you choose means the lender's guidelines. At this time, your loan consultant will help you decide which loan program will fit your needs and a more accurate picture of what mortgage interest rates are available to you.
By getting pre-approved for the purchase of a property, you strengthen your purchase power greatly. You can speed the preapproval process by providing accurate information and by having your income and asset documents on hand. Your pre-approval is usually valid for 3 to 4 months as long as your income, debt, assets, and credit have not changed.
About the Author
Joy Breiling has been employed with the mortgage industry since early 1997. During her career, Joy has fulfilled many positions within the industry including Operations Manager of a large Bay Area broker office. She is currently licensed with the California Department of Real Estate and is an active mortgage originator.
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