You may have read or heard about homebuyers being pre-approved for a home loan... and others who have pre-qualified for a loan.
Those two terms sound pretty similar, so what’s the difference? Which is better? And which should you do: get pre-approved or pre-qualified?
As similar as the two may be, they are miles apart.
For starters, getting pre-qualified is verbal only. It’s really just a best guess estimate of what you could theoretically get approved for based on what you tell the lender about your income and expenses.
This is not any sort of guarantee that you’ll be approved for that much money - just an estimate that.... maybe that’s what you could get.
Probably.
Hard to say.
With pre-qualification like this, you don’t get anything in writing. Nothing’s official, so you have no way of knowing how much you can actually borrow - just a guess.
And you’ll still need to go through the actual approval process later on. Which means all that time you saved by not having to gather your paperwork so you could just get pre-qualified? It goes right out the window because you’ll need to get that paperwork together for approval anyway.
If all you want to know is a guess of how much you might be able to get, Google has an online Mortgage Calculator you can use!
So what about pre-approval?
Well for starters, everything’s in writing for this one. That means lots of paperwork! Here’s a list of what you’ll need:
- Pay stubs with year-to-date info
- Two years of tax returns
- Info on any other real estate you may own
- Bank statements
- Investment statements (stocks, IRA, CDs, etc.)
- Residential history
[This list is incomplete, so make sure if you decide to work with me you talk to my lender for a more complete list of what you need for this process]
By getting pre-approved, you’ll get a written document saying that the lender would be willing to give you $X,xxx,xxx based on your situation. Yay!
But what’s so special about that document?
You now know exactly how much house you can afford.
Sellers will know that you’re a sure thing - you’ve got the approval for the loan amount needed to buy their home. You go to the front of the line: in front of both those who’ve only pre-qualified and those who haven’t done anything yet to see what they can afford.
So yeah, I know, getting all that paperwork together is a hassle-and-a-half! But if you’re serious about purchasing a home, you’re going to have to get it all together for an eventual approval anyway... so why not get it done earlier in the process so you can get a jump on the competition (aka Other Buyers).
When you’re ready to start searching for a home, you can drop me a line through the About Me section of my website.
OR, you can dowload my app to start searching through homes and contact me directly.
Once we’re connected, I can have you meet with my lender to get you pre-approved!