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Pre-Qualification Versus Pre-Approval:
Is There A Difference?
Mortgage Library: Loan Application Process: Prequalification: Pre-Qualification Vs Pre-Approval
|What's the difference between pre-qualification and pre-approval? In the world of real estate the terms "pre-qualification" and "pre-approval" are often used interchangeably. But they have different meanings.
What is a pre-qualification? A pre-qualification is an estimate of how much you can afford in a mortgage payment. It is based upon the information you provide, and is subject to the approval process, including further details such as a credit report, appraisal, and income verification. The information you provide won't be verified as part of the pre-qualification process.
What is a pre-approval? A pre-approval is a firmer commitment on behalf of the mortgage company and is a more formal process which includes a credit check and even an employment verification. During a pre-approval the mortgage company does all the work of a full approval, except for the appraisal and title search. A credit report will be obtained by the lender to verify your monthly payments on installment loans and credit cards, and to check whether you have a history of making your payments on time. You will also need to provide paystubs and W-2 forms (or tax returns if you are self-employed), plus statements from savings and investment accounts to verify your assets. If you've been pre-approved for a loan, you can shop for a house with more certainty and less anxiety because you won't be going through the whole process worrying about your mortgage approval.
However neither a pre-approval nor a pre-qualification means you are guaranteed a mortgage. Lenders still need to look at property appraisals, verify information, and in many cases, re-check credit before agreeing to make a loan.
For additional information, speak with local brokers and lenders. You may visit our Mortgage Lender Directory to find lenders in your local area.
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