Pre-approval vs Pre-qualification
What is Pre-qualification?
Pre-qualification is quick process. Loan pre-qualification does not include an analysis of credit reports or an in-depth look at the borrower’s ability to purchase a home.
Pre-qualified amount isn’t a sure thing, because it’s based only on the information provided to the lender. Usually the information thus provided is not verified.
What is Pre-approval?
You may be having 100K in your checking account and looking to buy a home.
However, It can be hard to shop for a home without knowing how much Mortgage the Banks will give you. This is where the Mortgage preapproval comes into action. Mortgage Pre-approval lets you shop with confidence. The 1st question most Realtors will ask is “Do you have a Pre-approval letter?
Apply for Pre-Approval
There may be 100’s of Mortgage Products to choose from. A preapproval is the process of determining how much money bank are willing to give you to buy a home. Lenders look at your income, assets and credit score to calculate how much you can borrow and what your interest rate might be. Your income, FICO Score and Down payment are the 3 most important factors in the preapproval process.
Mortgage preapproval represents a lender’s offer to loan the buyer money based on certain financial circumstances and specific terms. The buyer’s credit standing, employment, income, assets and/or tax returns are the documents the lender would want to see.
Before lenders decide to pre-approve you for a mortgage, they will want to look at several key factors like:
Your credit history/Credit score/Debt-to-income ratio/Employment history/Income/Assets and liabilities
Does Preapproval guarantee a mortgage ?
Preapproval in no way guarantees a mortgage will be approved. Since it involves a thorough review of your financial background and sets realistic parameters around how much you can afford to borrow if your application is approved. Here is where the Underwriter becomes involved.
Underwriting A Mortgage Loan
Underwriting allows lenders to verify the applicant’s earnings through bank statements, debt, assets, and details of the property to be purchased to assess if a mortgage loan application will be approved or not. The purchase Contract, the appraised value of the property, the condition of the property are things that an Underwrite will scrutinize before a Clear to Close (CTC).