Get Familiar with Loan Prequalification and Loan/Preapproval
When you start researching to buy a home, you’ll see the terms “mortgage prequalification” and “mortgage preapproval” thrown around a lot. While they sound similar, they aren’t the same — and they serve different purposes in your homebuying journey. Thinking of making an offer soon? Here’s what you need to know about prequalification versus preapproval and when they’re needed.
Prequalification
Getting prequalified can give you a rough idea of how much you can potentially borrow, which makes it ideal for the initial stages of your home search. It’s a relatively quick and easy way to figure out what your budget should be and learn more about what financing options are available to you.
You’ll need basic details like your income, price range and credit score. This information is quickly screened, which makes the process faster and simpler than preapproval.
Many sellers will also accept prequalification in your offer, and it is often mentioned as a minimum requirement for offers. But it may be less appealing if the seller gets offers with preapproval letters.
Preapproval
A preapproval is much more official and involves a thorough verification process. You’ll need to provide more information regarding your finances and employment, including important documents like tax returns. The lender will also do a hard credit check, which can impact your credit score.
It’s optimal to obtain a preapproval letter before you make an offer. It’s not necessary to obtain prequalification until you’re seriously considering a specific property for sale, but it’s best to start gathering the information you’ll need beforehand so you can receive your letter in a more timely manner.
Preapprovals give sellers more confidence, as it shows you’re serious about the purchase and financing isn’t an issue for you.
Ready to get started? Reach out today.
Information courtesy of Lisa Marie Schwartz - Fox Valley Mutual Mortgage Company of Colorado