Advantages of Pre-Approval
Pre-approval gives you a good idea of the type of mortgage you will qualify for and the price range of homes you can afford.
It can help you:
- Know how much you can borrow.
- Confirm your ability to qualify for a mortgage based on your credit, financial, and employment information.
- Strengthen your position to make an offer on a house. Sellers are usually more willing to accept offers from pre-approved buyers.
To get pre-approved, you'll need to work with a mortgage lender. The lender will review your credit, financial, and employment information after you fill out an application. Based on your individual circumstances, you may be asked to provide proof of income, like a paystub. A fee might be involved to cover application costs.
If you qualify, you'll receive a letter that says your mortgage is approved for a certain amount of money and for a certain amount of time. Being pre-approved does not mean you have to use that lender, although a different lender may offer different terms.
Pre-qualification is not the same as pre-approval.
A pre-qualification is a free test run of the loan application process that usually takes a few hours. The mortgage lender uses your credit, financial, and employment information to come up with an estimate of the mortgage amount you can afford. A pre-approval may require a complete application, along with an application fee. Usually, a pre-approval is your bank's guarantee of the amount they will lend you toward a home.
