Pre-Qualification Vs. Pre-Approval

If you are in the process of purchasing a home, your first step is to inquire about your mortgage financing options. As you’re doing this, it is very important to be able to distinguish the difference between a Pre-Qualification and a Pre-Approval. Based on your current financial situation such as income, savings, credit, etc, the bank will be able to inform you how much of a house you can afford.  Obtaining the right mortgage is extremely important and that’s when an experienced Loan Officer comes in to play.

So what’s the difference between these two concepts? It’s simple; a Pre-qualification is a preliminary and informal estimate of how much money you’ll be able to borrow for the purchase.  This is done by verbally supplying the bank/lender with your overall financial picture such as your income, debt, and assets.   It is a rough estimate based on basic financial information.

On the other hand, a Pre-Approval is a more in depth review of your finances in order to provide you with an accurate loan amount, interest rate, and loan terms. This step will require you to supply the following documents to your Loan Officer: last 2 years W2s and tax returns, last 2 months bank statements, last two paystubs, and any other statements of savings or retirement accounts you may have.  These documents along with your credit report and history will determine which loan option and amount best suits your current situation.

A Loan Pre-Approval is what you need if you are serious about purchasing a home. This will also assist your Real Estate Professional in locating a home that fits your needs, remain within budget, and shop with confidence.

Remember, a Loan Pre-Approval is your FIRST STEP when purchasing a home!