The Difference between Pre-Qualified and Pre-Approved

Before buying a home, you’ll need to review your credit in order to be eligible for a home mortgage loan. Clean up any negative marks against you by investing in a service that will file a dispute with the credit bureaus on your behalf. Investing in a credit restoration will save you money down the road and also open up home mortgage loan options you may not have qualified for previously.

What is a Pre-Qualification?

During a pre-qualification consultation, you’ll provide the mortgage lender with a snapshot of your current financial status. Pay attention as they explain the different types of mortgage loan options available to you based on your current income and credit as well as future goals. Knowing your mortgage loan options as you move ahead will help you decide which is best for your situation and is necessary for the pre-approval process.

A pre-qualification is different from a pre-approval in that it is not very in-depth. While it takes your income and credit status into account, neither one is verified. Pre-qualification consultations are normally free of charge and simply educate you on each of the loan options that may be available to you for the next step: pre-approval.

What is a Pre-Approval?

A letter of pre-approval involves further investigation into your financial status your income and credit history are thoroughly examined. Home mortgage loan options presented to you can then be decided upon and chosen for submitting on your application. Loan application fees often apply and an appraisal fee is sometimes included.

It may take a little extra time to get pre-approved, but once you have your confirmed letter of pre-approval, you are in a much better position to find a home. When it comes time to write an offer on a house you’ve found, having the letter of pre-approval shows the seller you’ve already secured the financing necessary to make the purchase. In fact, most sellers require a pre-approval letter to be submitted with the offer. Other buyers placing an offer on that same house may not have the letter of pre-approval needed to prove that they can in fact follow through on their offer. This puts you at a great advantage, so make sure you are pre-approved and don’t lose out against another buyer that is.

What Not To Do

One mistake some potential home buyers make is taking out an additional loan before applying for a home mortgage loan. Personal loans or loans for large purchases such as a vehicle, can mean the difference between approval and rejection when it comes to your home mortgage loan application. If you have the money for both, that’s great, but don’t let that shiny new car jeopardize the loan for that 3 car garage. Wait until after you’ve bought the home to take out loans for smaller purchases.

What Happens If I Am Denied a Home Mortgage Loan?

If your home mortgage loan was denied, not to worry. About a third of borrowers are denied, so you’re not alone. Find out why you were denied, you have the right to know. If you were denied because of a low appraisal, it’s worth asking a second lender. Some mortgage lenders are more lenient than others. If you were denied because of credit issues, address those issues and reapply. With a little time and effort, you can better situate yourself to try again and do better next time.