Prequalification and pre-approval may start with the same three letters, but there’s a big difference between the two when it comes to your mortgage.
Prequalification takes about an hour and is conducted by a licensed loan originator or broker working for a particular lender. To obtain prequalification, applicants need to provide an application and have their credit pulled. Once this information is obtained and reviewed by the lender an applicant is awarded with prequalification status. Although this can be helpful for buyers to know where they stand, it does not necessarily lock in their rate or guarantee a particular loan at a given price point.
Pre-approval is different than prequalification in that your information has been underwritten by an authorized Underwriter. Mortgage lenders often provide in-house Underwriters because they can approve you for a home loan quickly and efficiently. Upon receiving a valid pre-approval, your next step is finding the right home for the right price. Once you find that home and it appraises for the agreed-upon price or higher, you should be able to close your loan in a short period of time.
To get pre-approved for a home loan, be sure to fill out your mortgage application in its entirety. Leaving parts blank or incomplete will only make the process harder on yourself. In addition, you will also need to provide certain documents concerning your assets, income and employment.
In order to ensure your home purchase goes as seamlessly as possible, consumers are better off applying for a pre-approval because it helps them have an idea as to what their budget is and protects them from hidden surprises once they find a house and apply for the loan. If you have a pre-approval in hand, it shows your real estate agent and the seller that you are a serious home buyer; in this market it is extremely important to sellers that their prospective buyers have been pre-approved.