top of page
Typing

Home Loan News..

Pre-approval vs. Pre-qualification What’s the Difference

  • Writer: Michael Belfor
    Michael Belfor
  • Mar 16, 2021
  • 3 min read

Deciding it’s time to buy a home can be exhilarating—but it’s also a little daunting. Taking time to research your options before you begin your home search is often the best place to start. One big factor to consider is whether you need a pre-approval vs. a pre-qualification.


Essentially, this is the difference between having a lender verify your ability to qualify for a loan and getting an opinion on what you may be able to afford. Though both options have their perks, the major benefit of a pre-approval compared to a pre-qualification is that a pre-approval means that you’ve been thoroughly vetted for a loan.


That kind of knowledge is power. So, let’s get down to the differences when it comes to pre-approval vs. pre-qualification so you can understand which option’s right for you.


Pre-qualification

Getting pre-qualified is often thought of as the first step in obtaining a mortgage. When you get pre-qualified, you and your loan advisor will discuss your financial goals and what homeownership looks like to you. Your loan advisor will ask about your income, assets, debts, and obligations. Based on the information you provide, that advisor can tell you how much of a loan you may qualify for.


One of the big differences between a pre-approval vs. pre-qualification is that a pre-qualification is a rough estimate based on the data you provide. This information is not verified by the lender. It is a casual process that’s really more of an information gathering, and the result is an only an estimate.


Another difference between a pre-approval vs. pre-qualification is speed. The pre-qualification process is pretty fast, since the loan officer doesn’t need to verify your information or analyze your credit report.


Pre-approval

Pre-approval is like the second step to obtaining a mortgage, though many opt to skip step one and jump straight to a pre-approval—and for good reason. This is part of the official loan application process that’s based on verification of your income, credit, and assets. You and your loan advisor will compare mortgage options to decide which loan program will help you reach your financial goals.


As you move forward in the pre-approval process, you’ll complete a loan application even though you don’t have a property address yet. For this reason, a pre-approval is often thought of as a “conditional commitment,” since you still have to find your dream home before securing a mortgage.


When a lender has looked at—and verified—your ability to get a loan, there are less likely to be unpleasant surprises as you continue the process of getting a mortgage after you’ve found your home.


Things You Should Know About Pre-approval

Your loan advisor will take into account (and verify) several areas when you’re applying for pre-approval. Some of the documents they may request from you, or order on your behalf, include:


  • Credit report

  • Wage statements, such as W-2s (or 1099s, if you’re self-employed)

  • Proof of additional income, such as alimony, child support, bonuses, or commissions

  • Tax returns

  • Bank and investment account statements

  • Identification documentation, such as a driver’s license, Social Security number, and a signed document allowing them to pull your credit report

  • Debts, including additional mortgages, credit cards, auto loans, student loans, and other outstanding balances

  • The length of time it takes to complete a pre-approval vs. a pre-qualification depends on a few things. Naturally, the pre-approval process is smoother if the lender has all the information they’ve requested and if this information is accurate (i.e. double check your name, employer, current address, Social Security number, etc.). If you have a solid pre-approval application with no errors, this process can be done as quickly as the same day.


If, however, your application contains a few “red flags,” such as a history of foreclosures, a lot of debt, or a low credit score, it can take a bit longer to obtain pre-approval. The lender will sort through these complexities as they calculate your debt-to-income (DTI) ratio, your ability to repay the loan, and anything else that might need extra explanation or research.


Now, we know that no one is perfect. Marks on your credit report or any of the situations above shouldn’t deter you from applying for a home loan. They simply mean you should seek out the help of a trusted loan advisor early on so you can get the process rolling.


When your pre-approval application is submitted, processed, and approved, you will receive a written confirmation from the lender stating they are willing to lend you a specific amount of money. A pre-approval letter is generally good for 60 to 90 days, giving you plenty of time to shop for your new home.


If you'd like to get started or learn about the overall process, shoot us a message or sign up to join one of our FREE ONLINE FIRST TIME HOME BUYER SEMINARS.

 
 
 

Comments


The Belfor Team

Mortgage Banker

Branch Manager

NMLS 264700

CA DRE 01878769 
SF.415.231.0900

OC. 949.468.0012

equal housing lender.png

​ NMLS CONSUMER ACCESS LINK: NMLS #1850

Privacy Policy APM Privacy Policy 

APM Disclosure Policy
 

Belfor Team/American Pacific Mortgage - 30011 Ivy Glenn Dr. Ste 221 – Laguna Niguel – CA 92677. NMLS 398359.

© 2020 American Pacific Mortgage Corporation. For informational purposes only. No guarantee of accuracy is expressed or implied. Programs shown may not include all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions may apply. Licensed by the Dept of Financial Protection and Innovation under the CRMLA. Licensed in CA. CA DRE #01215943. NMLS 1850. Equal Housing Opportunity.

SMS Disclosure:

By providing a telephone number and submitting the form you are consenting to be contacted by SMS text message (our message frequency may vary). Message & data rates apply. Reply STOP to unsubscribe from further messaging. Reply HELP for more information. See our Privacy Policy.

Privacy Policy for Communication Phone/Email/SMS:

We do not share data with third parties for marketing/promotional purposes.

By submitting your phone number to The Belfor Team at American Pacific Mortgage, you are authorizing a representative of our company to send you text messages and notifications. Message frequency may vary. Message/data rates apply. Reply STOP to unsubscribe to a message sent from us, and HELP to receive help.

bottom of page