Understanding Mortgage Pre-Approval vs Pre-Qualification – Mortgage prequalification and Mortgage pre-approval process is necessary for determining if a borrower meets a lender’s requirements for a home loan. This should be the first thing every home buyer should do. Getting preapproval even before you give your realtor a call will surely avoid unnecessary heartbreak for you.
What is the difference between pre-approval and prequalified?
Mortgage Prequalification entails you providing a lender your financial details to help them make suggestions on the amount of mortgage you qualify for. While a mortgage pre-approval comes with a more detailed background check aimed at determining the specific mortgage amount you can approval for. This will also provide you with a clear picture of your possible mortgage interest rates will be.
Understanding Mortgage Pre-Approval vs Pre-Qualification and How to go about it
The pre-approval process is very formal, you’ll have to complete an official mortgage application which usually requires an application fee. The application will require some necessary documents. This will help the lender perform an extensive check on your credit rating and financial.
Here are some important documents to help you complete the process:
- Proof of income: lenders will require proof of steady income from you, documents such as; pay stubs, tax return information, quarterly account statement including your checking, saving and investment accounts. Lenders will also ask for proof of additional income like alimony or bonuses.
- Asset declaration: lenders request your current bank statement and your investment account statement as evidence that you can afford the downpayment and closing costs on the prospective property.
- Credit information: A good credit score of 740 and above will earn you a low-interest rate. If you have a low credit profile, you may need to pay more interest or pay additional discount points to lower your rates.
- Proof of employment: your lender may want to call your employer to confirm that you are still employed and to check your salary. If you’ve recently changed jobs your lender might contact your previous employer. For those on self-employment, you’ll need to provide additional information about your business and income.
- Other required documents: your lender may also request your social security number, driver’s license or state ID and your current residential address. Be cooperative with the requirements of your lender because it’ll make your whole application process go smoothly.
When you finish with the application process, depending on the speed of your lender’s system it typically takes under 1 hour to for pre-approval.
If your application is not approved, don’t give up, reapply. You can shop around for other financial institutions. Ensure you resolve the initial issue that caused you to be turned down. You need to build a flawless credit history meticulously.
Finally, Understanding Mortgage Pre-Approval vs Pre-Qualification process are easy; you just have to be ready with the needed documents. Also, cooperate with the lender to ensure you get the home you desire. With this done, you’ll be at an advantage when dealing with a potential seller. Furthermore, you’ll be confident knowing what you can or can’t afford.
So even though it’s cool to shop for the home of your choice, you must start the process at a lender’s office instead of an open house. This shows how serious you are.