Get pre-approved, not pre-qualified, before looking for a home.

We're sure you see it all the time - "You're pre-qualified/approved for [insert amount here]" - in your mail. Let us help clarify the 2...
POSTED ON:
September 28, 2020
UPDATED ON:
October 30, 2020
Category:
Financing

As professionals, we understand how being pre-qualified and being pre-approved can be confusing. Let us help clarify the difference so you can be best positioned for a new home. If you're in a hurry, we've provided a simple table for a quick overview...

PRE-QUALIFIEDPRE-APPROVED
Usual 1st step for new homebuyers, but can be skipped if you're confident about your financial standingNext step after qualified, but can be first step for you're confident about your financial standing
Consumer-submitted dataVerified, consumer data (credit check, income/asset documentation are required)
Receives letter with suggestions of next best steps, whether consumer is ready or a list of programsReceives a commitment in writing, states exact amount and rate for the loan
Estimation of readiness, allows planning and suggestions of best program fitDefinitive numbers and will be taken much more seriously than a qualifying letter
Usually freeOften no charge but can range up to $500 (we promise it's free with us!)

How do I get pre-qualified?

New/First-time homebuyers looking to obtain a mortgage can inquire with us (or any other mortgage professional). We will then discuss your goals and current finances (estimated income, assets, credit score, debt) to determine your situation. Based on these estimates, we suggest how to move forward - whether it's a list of programs you can potentially qualify for and/or steps on how to be better prepared in the near future.

How do I get pre-approved?

Pre-approval is the natural next step to pre-qualification. You can skip getting pre-qualified - if you're confident with your financial situation - but you can't skip getting pre-approved if you're looking for a mortgage.

When you're ready to move forward, you can submit an official mortgage application. Part of the pre-approval process is an extensive credit and financial background check - which is why presenting a pre-approved loan letter is taken much more seriously than a pre-qualified one that's based on estimates.

This process will reflect a hard-inquiry on your credit report. But being pre-approved allows you to be more confident... you receive a definitive amount, interest rate, and a commitment letter you can provide when making an offer on the right home.

The formal way to know whether you're ready or not is to get either pre-qualified or pre-approved. Photo by Hello I'm Nik on Unsplash.

What can I do to better my chances of getting pre-qualified or pre-approved?

  • The worst thing you can do is to inflate your financial estimates. All real estate/mortgage professionals expect honesty from you and your numbers so we can provide the best service possible. Even if the outcome of a pre-qualification is based on inflated estimates, the facts will reflect your true financial situation during the pre-approval process.
  • Don't spend large sums of money, especially if it can wait. Big ticket purchases will reflect badly on your spending habits - which can affect your chances of getting pre-approved.
  • Conduct a personal credit audit. You can always check your own credit report through annualcreditreport.com and see where you can make improvements. The Consumer Financial Protection Bureau (CFPB) provides a free credit report review checklist - you can download it here. If you're looking for more information on credit scores, we wrote an extensive blog on the topic - including what makes up your credit score and some tips on how to manage it.
  • Make sure to keep all of your financial documents safe and current. The application process will require documents such as pay stubs, tax documents, and more based on your financial situation.
This screenshot was a slide from our webinar on the importance of your credit score, debt, and job. It shows a preview of the CFPB document mentioned in one of the points above.

Want the watch the webinar on credit score, debt, and job? Click here to open the video.

If you have any questions not covered in this post, please let us know! We're always looking to improve our content and we can't do that without your feedback. When you're ready to get either pre-qualified or pre-approved, contact us. We enjoy the process and are only here to help.

Got a real estate/mortgage question? Let us know!
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