Prequalified and Pre-approved: What's the Difference?
You’ve probably heard the words “pre-approval” and “prequalification” if you’re thinking about purchasing a home. There is a subtle difference between the two, even though they are frequently used interchangeably. This post will explain the difference between being prequalified and being pre-approved.
What's the Difference?
Both phrases refer to the first steps required to determine whether or not you are a good candidate for a home loan and how much you may borrow.
However, there is a distinction to be made between being prequalified and being pre-approved. Prequalified is effectively the same as pre-approved in that it’s an estimate of how much your mortgage can be, but it’s nothing more than that.
It’s the simplest first step in the home-buying process. Your financial history (such as income and debt) will be examined by the mortgage specialist, who may also verify your credit score.
It’s crucial to remember that prequalification doesn’t mean you’ll get a loan. It is only an estimate. Get pre-approved if you want something more concrete.
What is a Pre-Approval?
Pre-approval is more complex since the mortgage specialist will check your credit score and verify your income and assets in detail. The following are some of the documents required for pre-approval:
- Tax returns
- W-2s or 1099s
- Recent pay stubs
- Recent bank statements
- Credit score
A pre-approval will give you a stronger idea of what you can afford.
Does Getting Prequalified or Pre-approved Even Matter?
If all you want is an estimate of how much you can afford, being prequalified is ideal. It’s an excellent method to begin planning and preparing for the purchase of a house.
Pre-approval, on the other hand, has a lot more weight. You’ll have a better sense of how much you can borrow and what your interest rate may be if you get pre-approved, and you’ll be regarded more seriously as a possible buyer when you start looking for a property.
Pre-approval also offers you an idea of your credit score and whether you need to improve it before applying for a house loan.
The Bottom Line
Prequalification or preapproval are not guarantees of home loan approval, but they do matter! Are you ready to get pre-approved? Start filling out your application online right now! You’ll be considerably better prepared to secure a mortgage if you conduct a comprehensive credit check and analyze your finances.