Prequalifed vs. Preapproved
If you’re starting your home buying journey, talking with a lender is a smart strategy. When you know your available options and confirm your budget, you’ll be able to shop for homes with confidence.
How to Get Prequalified for a Home Loan
Getting prequalified for your home is a very good idea. It’s a simple, initial step you can take before starting the formal loan process. It’s not required, but it will save you a lot of time and hassle once you’re ready to buy and start looking for a home.
Prequalification gives you an estimate of how big of a loan, and what interest rate, you might qualify for, as well as your potential monthly payments. The information you get will be based on an informal conversation you have with a PrimeLending Loan Officer. You’ll fill out a loan application and be asked some questions like:
- What do you think your credit score is?
- What is your income?
- How much cash or other assets do you have?
- How much debt do you have?
Your PrimeLending loan officer will then review your information, and possibly check your credit score. It’s really quite simple. Completing the application and answering the questions may take as little as 10-15 minutes. You’ll likely have an answer within a few hours or on the same day, depending on when you apply. There are no risks, costs, and it’s easy. You’ll then receive a letter stating the loan amount you’ve been prequalified for to have handy when you start looking for homes. There really aren’t any reasons you should not take the step to get prequalified:
- It will not affect your credit score
- No additional documents are required besides the application
- There are no fees or other costs for prequalification
Why Get Prequalified for a Mortgage?
To take full advantage of prequalification you should do it before you start looking for a home:
- Knowing the loan amount you could qualify for will tell you how much home you can afford
- You’ll save time by only reviewing homes in your price range
- If you discover any credit problems you can resolve them early
- You can confidently make an offer as soon as you find a home you like
- Your offer is more likely to be accepted than the offer from a buyer who is not prequalified
- You might get more support or help from a real estate agent who knows you’re serious about buying
How to Get Preapproved for a Home Loan
If you’re able or have the time to plan ahead, getting preapproved is even better than getting prequalified. Offers backed by pre-approved financing are the most attractive offers you can make to a seller.
While getting prequalified provides you a loan amount, interest rate and monthly payment that are estimated, preapproval gives you the specific loan numbers you do qualify for. It also starts the formal application process. Other considerations associated with preapproval include:
- It takes longer
- There may be a standard application fee
- You’ll need to start collecting and submitting the required paperwork, including tax records, banking, financial or other investment and asset statements
- Your credit will be checked, your asset to debt ratio will be closely examined and your income will be verified
- The good news, since it includes almost everything required as part of the mortgage loan process, once preapproved, you’ll be ahead of the game
Why Get Preapproved for a Mortgage?
Pre-approval takes you much further through the application process, and puts you in an even better position to buy.
- You’ll be able to move much faster once you find the home you want
- Most of the paperwork will be out of the way so your loan can close faster
- You’ll be a more desired buyer with approved financing
- Sellers will prefer your offer because it will likely close without trouble or delay
- In a competitive market, it’s unlikely you’ll lose a home to a buyer without financing
What Happens After Preapproval?
Preapproval gives PrimeLending an accurate understanding of your financial stability and ability to repay the loan. Once you find the house you want to buy, the final stage of the loan process begins. You’ll let us know what your offer is, and exactly how much money you want to borrow. The next steps to finalizing your loan include:
- The house will then need to be inspected to make sure it’s in good condition, and to reveal any deficiencies that could require repairs or more money
- The house will also have to be appraised to make sure the purchase price accurately reflects the current market value of similar homes in the area
- All the paperwork and documents you will have submitted will be double-checked and verified for accuracy
Preapproval gets most of the work you have to do in the mortgage process out of the way, which will give you greater peace of mind once you’re ready to make an offer on a house. Depending on the type of loan you’ll receive, and other factors, your preapproval should be good for at least two to three months.
Your PrimeLending loan officer will work with you throughout your prequalifying or preapproval process to make sure all your questions are answered, and to keep things simple. They’ll even help you collect and submit documents.
Ready to get started?
**A pre-qualification is not an approval of credit, and does not signify that underwriting requirements have been met.