Guest Post by Nicole “Kiki” Williams, Mortgage Planner with The Hanson Planning Group, a Affiliate of Megastar Financial
I’m often asked, “What’s the difference between a mortgage loan Pre-Qualification and a loan Preapproval.”
A Pre-Qualification is part of an initial conversation when applying for a home loan. You’ll answer the basic questions to complete a loan application such as current and previous home addresses, employment history and income amount, bank account balances and monthly debts. With this information, a lender can provide an estimated loan amount and monthly mortgage payment for which you will likely qualify. A credit report may be pulled at this time, but it’s not always necessary. A pre-qualification is great for potential buyers looking to get a general idea of the purchase price they likely qualify for or how much a mortgage payment will be for a certain purchase price. However, it’s not recommended for buyers who are actively looking to purchase a home.
A Pre-Approval is completed when a credit report is pulled and the information given on the loan application is verified with a buyer’s documentation such as pay stubs, W-2 statements, tax returns and bank statements. In most cases, the loan scenario is run through an automated or “Desktop” approval system. The exact loan amount and monthly payment amount a buyer is eligible for can then be determined. A preapproval is ideal for buyers who are ready to search for homes, as this demonstrates to a seller your loan application is completed and has been fully vetted by a mortgage lender. A preapproval letter accompanies any purchase contract offer and gives the seller the assurance that a buyer’s loan eligibility has been verified and the buyer is ready to get a mortgage on their home of choice.
Typically, a pre-qualification can be completed in a few minutes. A preapproval may take 1-2 days or longer depending on the complexity of your financial profile. Obtaining a loan preapproval is the best way to move forward with your new home purchase. It will give you the peace of mind knowing how much you can afford and that you’re ready to buy!
For more questions about home loans or to the start the loan approval process, call mortgage lender Nicole “Kiki” Williams today!
Nicole “Kiki” Williams
Mortgage Planner| NMLS 256034