“By failing to prepare, you are preparing to fail.”

This quote holds true for those wishing to purchase a home as well. Due to lack of preparation, many buyers believe the mistaken notion that being pre-qualified for a home loan means that they have been pre-approved for home loan. This simple misunderstanding can prove disastrous for borrowers, so it is very important to understand the difference between a pre-qualification and a pre-approval.

Getting a mortgage pre-qualification does not mean you will actually be able to obtain a home loan. The pre-qualification simply gives you an idea of the home mortgage loan you MIGHT qualify for based on information you provided, usually on the internet or over the telephone. It is a very simple process that usually does not include an in-debth analysis of your credit and finances. Due to it’s quickness and lack of in-debth analysis, the pre-qualification amount is not certain, therefore not holding the same weight as a mortgage pre-approval.

The pre-approval process is a far more in depth process which examines the borrowers actual credit worthiness and verifies their income and assets. In order to obtain a pre-approval for a home loan, a borrower has to provide actual documentation of their income, assets and debts. Borrowers are expected to provide documents such as pay stubs, bank statements and tax returns just to name a few. Since a credit check is also required, the borrower may also be expected to pay an application fee. Once you are pre-approved, the lender will provide a letter stating how much they will loan you for your home purchase. With this pre-approval letter, you can start your home search!

It is important to know that in order to get funding, other steps and contingencies have to check out in the home you wish to purchase. Some of these include a title search, appraisal and inspection. Due to this, a mortgage pre-approval is also not a guarantee.

In short, just because you may have been pre-qualified for a home loan does not mean you will actually get one. However, a mortgage pre-approval significantly improves your chances of purchasing a home with a mortgage, therefore, you are seen as a more firm buyer in the eyes of real estate agents and sellers.

For more information or to be pre-approved for a home loan, contact me today! I have a team of lenders that are ready to help!