Posted by Craig Strent (NMLS ID #6342) ● August 19, 2019

Home Loan Pre-Approval vs. Pre-Qualification: What’s right for you?



Home loan pre-qualification is a good starting point as you begin your home-buying journey 

Home loan pre-qualification is when you tell a lender some basic information, such as what your income is, how much money you have available for a down payment, and typically allow a review of your credit report. In return, they communicate to you their sense of what type of mortgage you may qualify for, how much money you might need to close and, and what terms might be offered to you. Note the word “might” frequently as during the pre-qualification process, no documentation of income or assets is provided by the borrower and no review of documents to determine qualification is conducted by the lender. Pre-qualification is a good starting point for you as a home buyer, at which time you can then determine if you would like to move forward with pre-approval, which is an essential step to being able to place an offer on a home.

Home loan pre-approval is what most home sellers want to see before they consider an offer

Home loan Pre-Approval is the next progression after Pre-Qualification. In the pre-approval stage, income and asset documentation are fully reviewed and the credit report is vetted. During this stage, issues related to how your income may be structured, where your down payment funds are coming from, and how your credit score impacts your loan terms will be determined by your lender. Once all potential issues are addressed, your lender will issue a letter of pre-approval. The letter will indicate several key points:

  • Income, funds for down payments, and a credit report are reviewed and acceptable
  • The purchase price you are qualified for
  • The down payment percentage required
  • Other items required to obtain financing; these typically include an appraisal of the home and review to the title work to ensure a clean ownership chain
  • Expiration date of the pre-approval

In most markets, a seller will not accept an offer from a buyer without a pre-approval from a local lender indicating that the buyer can in fact obtain financing to purchase the home. The seller will want this assurance prior to removing their home from the market and avoid wasting valuable time if the buyer’s financing does not come through.

Don't begin seriously shopping for a home without first getting home loan pre-approval 

The #1 mistake most home shoppers make is looking for homes without being pre-approved. Doing this can result in touring homes that you don’t qualify to buy, scrambling to get an offer in when you find a place you like, and losing out on a potential home for not providing a pre-approval with your home.

Bottom line – There’s no such thing as “casually shopping.” If you’re looking online, driving by homes, and popping into open houses, then you are only “casually shopping” until you find a home that you would like to bid on and that’s when you need to be ready to make an offer. Pre-approvals are free, good for 60-90 days typically and easily updated. If you’re thinking about buying a home, get pre-approved first. 

Apex Home Loans can help you begin the process online to get pre-approved,  or, If you would like one of our friendly and experienced loan officers to get in touch, please, contact us.  


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