What is the difference between mortgage pre-qualification and pre-approval?

Hello ladies and gentlemen! This is Mortgage Loan officer Mario Cardenas with Affinity Home lending in Marietta Georgia reporting live with your mortgage topic of the day. I hope everyone is crushing their week! Today I want to briefly discuss the difference between a mortgage purchase pre qualification and a pre approval. 

So What exactly is a mortgage prequalification?

Prequalification is an early step in your home buying journey. When you prequalify for a home loan, you’re getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check performed by your mortgage loan officer. 

Prequalification is also an opportunity to learn about different mortgage options and work with your lender to identify the right fit for your needs and purchasing goals.

The major benefits of a pre qual is that You can start house-hunting knowing how much you might be able to borrow.

 Another advantage is that it takes a short period of time to acquire a pre qual letter from your lender. Typically a pre qualification letter can be provided the same day it is requested.For a pre qual a lender will need to acquire a few different pieces of financial information from the borrower. This includes….

• Income information

• A Credit check

• Basic information about bank accounts

• The Down payment amount and desired mortgage amount

• Take note that No tax information is required by most lenders. 

So What is mortgage pre approval then?

Pre Approval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will complete a mortgage application and the lender will verify the information you provide. They’ll also perform a credit check. If you’re pre approved, you’ll receive a preapproval letter, which is an offer but not a commitment to lend you a specific amount of capital. Pre approval letters are typically valid for 90 days.

Getting preapproved is a wise decision to take when you are ready to make an offer on a home. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage.

Due to a pre approval letter being much more involved and carrying more heft,  When making an offer on a house you will gain a huge competitive advantage over other buyers that only provide a pre qual letter. 

Pre approval takes a little more leg work so make sure you give your lender adequate enough time to analyze your financial situation before executing on an offer for a house. To give yourself enough cushion and to insure no funny business I recommend giving your lender at least 14 days before you make an offer. 

The general Requirements for a pre approval are 

• Copies of pay stubs that show your most recent 30 days of income

• A pull of your credit. 

• Bank account numbers or your two most recent bank statements

• The Down payment amount and desired mortgage amount

• W-2  statements or 1099 statements if self employed, personal and business tax returns from the past two years

It was a pleasure as always to discuss the mortgage topic of the day. If you have any questions or are in need of starting the pre qualification process then feel free to apply at MarioCardenas.net . It is very easy and only takes about 10 min to complete. Until next time, this is Loan Officer Mario Cardenas signing out. Stay classy everyone!