The first stages of home buying involve pre-qualification and pre-approval. These are standard terms that you will encounter as you start with the process of getting a mortgage. To understand better how these two may help you own your dream home, let’s discuss the critical differences between them.
What Is a Mortgage Pre-qualification?
Pre-qualification is an essential step in the mortgage process to determine how much you can comfortably afford. Here, you will hand over your overall financial information indicating your income, assets, and loans. The lender will do a credit check and review the provided information. There will be no cost incurred because the whole process can be done online or over the phone.
Once you prequalify for a mortgage, the lender will estimate how much loan you can take out. In addition to that, the lender might recommend mortgage options that will work best for you.
What Is a Mortgage Pre-approval?
Unlike pre-qualification that only uses a quick assessment of the information about your finances, pre-approval will require your records to be thoroughly investigated. After completing your mortgage application, the lender will conduct an extensive background check. Upon verification, the lender will send you an offer letter indicating a specified amount that you can borrow.
The application for mortgage pre-approval may take longer compared to a prequalification. Despite this, the process can still be fast, depending on your loan provider.
Which Is Better between Preapproval and Prequalification?
Prequalification and preapproval help determine how much house you can borrow. Aside from that, being prequalified and preapproved would mean that you earned your eligibility for a mortgage.
For first-time home buyers, starting with prequalification is a better option. While establishing your plans for your home, it’s crucial to find out how much house is ideal for your financial situation. You can begin looking for homes that are matched with your ability as a borrower.
On the other hand, pre-approval gives a significant advantage to buyers who want to stand out among other buyers. If you don’t want to lose the opportunity to own your dream house, pre-approval can help you more than prequalification. Other than that, getting pre-approved can speed up your buying process. Between a prequalified and preapproved, a home seller will likely close the deal with someone who has his financial records reviewed extensively.
FAQs about Getting Preapproved or Prequalified
1. How Long Does a Preapproval or Prequalification Take?
Prequalification can only take a few minutes since it can be done online or over the phone. Meanwhile, pre-approval can take a few business days since documents must be thoroughly checked and verified.
2. What Financial Information Is Needed?
Providers of home loans in Colorado Springs will require you to supply an overview of your income, debts, and expenses to prequalify. In preapprovals, you’ll also give financial information but with supporting documents.
3. When Should You Get Preapproved or Prequalified?
The best time for preapproval and prequalification is before looking for homes.
As you have seen, preapproval and prequalification are important in getting a mortgage. Despite their similarities, they would surely have differences that you need to know. If you have any concerns, you can consult with your real estate agent or lender to help you decide which of the two you need.
Are you looking for the best mortgage in Colorado Springs? For a quick, efficient, and hassle-free process on prequalification and preapproval, you can rely on the services of Total Lending Concepts. We are a mortgage lender in Colorado Springs that helps homebuyers land their dream home by offering suitable mortgage options. Contact us for a great mortgage deal today.