When buying a house, you want to make sure you know exactly what you are getting yourself into. There is alot of real estate lingo that most people may not know. Fear no longer, because this post will help answer some questions you may have! Many people wonder what the difference between pre-qualified and pre-approved is, and sometimes use them interchangeably, this isn’t exactly right however.
When buying a house, the first thing everyone wants to know is, can you actually afford it? The agent will definitely want to know this, because they don’t want to waste their time and your time if you cannot actually place an offer on a property you’re looking at. Because an agent and the home seller want to know that you are serious, they will request that you get pre-approved . So what is the difference?
Pre-qualification is when you want to finance your home purchase with a mortgage. This is a check that ensures that you can afford this house based off of your income/debt levels, assets, down payment, employment history, credit score etc. This can be done very quickly and can be done with a bank or a mortgage broker. This pre-qualification however does not really hold much weight in the agent’s or seller’s perspective. This is because this is for the most part, all hypothetical and is only an estimate. This is only a determination of what you would most likely qualify for if you made an offer and applied for a loan. So how do you really show an agent or seller you are serious?
A pre-approval holds much more weight and can show everyone that you are truly serious about buying a home. A pre-approval is a written, conditional commitment from a bank or mortgage lender that says you are pre-approved for the mortgage financing. In order to get pre-approved you have to fill out a loan application, verify your income, assets, employment documentation and check your credit. This process can take around an average of 60-90 days. Once this has occurred you will receive your pre-approval letter from a bank or lender.
It is important to keep in mind that a pre-approval letter is not mandatory in order to make an offer on a property, however it definitely is a plus and will help you in the long run. Having the pre-approval letter on hand and ready when it is asked from you can save you time and money, and can ensure you put in the bid for a property in a timely manner.