Pre-Approved vs Pre-Qualified: Which one do I need?

When you're ready to buy a home, you'll likely need to obtain a mortgage loan. In order to do that, most lenders require potential borrowers to undergo a process called pre-approval. Pre-approval is when the lender reviews your financial situation and gives you an estimate of how much money you'll be able to borrow for a mortgage loan.

There's another term that's often used interchangeably with pre-approval, and that's pre-qualification. Both terms refer to when the lender gives you an estimate of how much money you'll be able to borrow, but there are some important differences between the two that you should be aware of before beginning the home-buying process.

Differences Between Pre-Approval and Pre-Qualification

The biggest difference between pre-approval and pre-qualification is that pre-approval is based on a more in-depth analysis of your financial situation. In order to get pre-approved, you'll need to provide the lender with documentation such as W2 forms, pay stubs, tax returns, and bank statements. The lender will use this information to assess your current financial situation as well as your ability to repay the loan.

With pre-qualification, on the other hand, you don't need to provide any documentation to the lender. Instead, they will base their estimate on unverified information you give them about your income, debts, and assets. Because of this, pre-qualification is less reliable than pre-approval and doesn't carry as much weight with sellers.

Why It Matters To Home Sellers

If you're selling your home, it's always best to work with buyers who have been pre-approved for a loan. This is because sellers know that buyers who have been pre-approved are more likely to actually be approved for a loan when they go through the official approval process later on. This means there's a smaller chance that the deal will fall through because the buyer couldn't get approved for financing.

What Should Home Buyers Do?

When you're ready to buy a home, be sure to get pre-approved for your loan instead of just pre-qualified. Pre-approval is based on a more in-depth analysis of your financial situation and provides sellers with added assurance that you'll be able to actually get approved for financing. Getting pre-approved will also help streamline the home-buying process since you'll already have an idea of how much money you can borrow! It saves lost time and opportunity for buyers, sellers, and both of their agents.

Phone(469) 789-6769

Email[email protected]

Address Fritz Realty Group
343 Country Meadows Blvd
Waxahachie, TX 75165

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