Thinking of buying a home? You’ll want to understand the difference between being pre-qualified and pre-approved. Knowing this could save you so much time, money, and worry.
Before starting your home search, you have to decide on a price range. More importantly, you have to find out what a lender thinks is your price range. Imagine you look and look for your perfect house, find it, and the bank won’t lend you enough money to buy it. That’s where pre-qualification and pre-approval come in.
To define the two procedures, we will use Realtor.com, which is the National Association of Realtors website. They say, Pre-qualification is a basic overview of a borrower’s ability to get a loan. You provide all the information, without any kind of paperwork to back it up. Pre-approval is more in-depth. The lender will look at your bank statements, credit score, and other information. Neither is a guarantee you’ll get a loan, but a pre-approval is more reliable and favored by Realtors and sellers.
Is it simple to get pre-approved? No. Simple is being pre-qualified. Pre-approval takes some time and effort. If you are a W-2 employee without any unusual tax issues, it is not too difficult. If you are a 1099 or Schedule C earner, or if you own rental properties, it will take a while. However, you will be so much better prepared, and if you plan to buy, you will need to gather these documents eventually anyway. Also, if there are some errors in your credit report or credit score, you will have some time to correct them.
Look at this from a seller’s and an agent’s standpoint: they do not want to take a property off the market while waiting for you to get pre-approved for a loan. You look the best if you are an all-cash buyer, but if you are a few hundred thousand short, pre-approval is the way to go. If you have any questions about these ideas, reach out to a friendly and professional DFPI or DRE-licensed loan originator. Don’t know one? I have thousands of MLO students who would be proud and eager to serve you. 📧 [email protected]
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