Purchasing A House? Get Loan Pre-Approved and Pre-Qualified

When mortgage applications are concerned, there is a huge difference between pre-qualified and pre-approved. You have to know the meaning and complications of both terminologies in order to arm yourself for the sometimes rough ride along the road to mortgage that lies before you.

Pre-qualification is simple and pertains to the very first stage in the procedure of acquiring a mortgage. The lender must receive all your financial data, debt, earnings and assets. Determining the qualifying amount depends on the lender's appraisal of your information. Pre-qualification is usually free and can be done over the Internet or the telephone.

The amount indicated by pre-qualification is a peg but it does not insure that you will obtain that exact amount. Pre-approved brings much more credence because pre-qualified is a subjective assessment based exclusively on data which the buyer provides to the lender. The next phase in the process is pre-approval and it is a bit difficult than the first.

Pre-approval requires that you complete an official mortgage application which there is also a charge for. Everything the lender will need in performing a check on your credit rating and financial status is supplied on the application. It will become apparent to you at this point both the amount for which you have been approved and the interest rate you will need to pay on the loan. You might even be able to lock in a specific rate.

With pre-approval is a promise in writing (although conditional) for a specific loan amount. Pre-approval sets limits on a price level, which is beneficial when looking for a new place to live. The seller looks at a buyer with pre-approval status as someone well on their way to a mortgage. Both pre-qualification and pre-approval are helpful because they inform potential buyers of the price range they should be searching for when shopping for a house. By not wasting time looking at homes you cannot afford, the process moves fast because a sale will not rely on obtaining financing.

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