Frequently used interchangeably pre-qualified and pre-approval are two very different processes that every home buyer should understand.
What Does It Mean To Get Pre-Qualified?
The first step of the home buying process should be a mortgage pre-qualification. This is where you share basic financial information with your mortgage lender, including your gross income and assets. A credit report will be pulled for a pre-qualification. The credit report is how the Mortgage Loan Officer and Underwriter can see all of your liabilities and credit history. With this information, the lender is able to give you an estimate of how much home you could afford and how much you can borrow.
To get pre-qualified it takes just a few minutes to fill in some basic information online and is absolutely free. A Mortgage Loan Officer will contact you when we receive the prequalification application. They will review the application with you and complete any missing information. Additionally, the loan officer will be able to evaluate your mortgage options and help you determine what mortgage program is ideal based on your financial situation and goals.
Once the lender receives your financial snapshot, they will review the credit history and income. If approved, you will receive a pre-qualification letter within 24 to 48 hours. The prequalification letter has a list of requirements in order for the lender to give you a full loan approval.
With a pre-qualification letter in hand you now have an estimate of what you can borrow and can begin shopping for homes that fit your borrowing capacity.
Why Get Pre-Qualified?
A prequalification is the best way to find out what you may be able to afford. This type of application may also alert you to some information in your credit report that may prevent you from buying a home right now.
Some realtors may not want to show you homes until you have a pre-qualification letter. This usually happens with more expensive homes.
What Does it Mean to get Pre-Approved?
Getting pre-approved means your mortgage is approved pending the outcome of the appraisal and title commitment. Unlike the pre-qualification, a pre-approval is deep dive into your financial picture. The information needed is greater and more in-depth. You’ll submit a full mortgage application at this point. The Mortgage Loan Officer will review the application with you and help determine which mortgage product is right for you, just like they do for a prequalification. The lender will pull your credit report and collect support documentation from you. The application is then given to an Underwriter for a full review. Once an Arbor Financial Underwriter approves the application, the approval is good for 120 days.
When you have a signed purchase agreement, the Mortgage Loan Officer will give you a loan estimate, lock your interest rate and have you sign all application documents.
At Arbor Financial Credit Union pre-approval means you can be confident in knowing the loan amount you are approved for. With this information, you can start searching for a starter home or the home of your dreams.
Things to Know About the Pre-Approval
You can get pre-approved at any time during the house hunting process, however, if you do a pre-approval prior to finding a home then your completed application can be processed quicker. The pre-approval is good for 120 days. If you’re unable to find a home within 120 days, don’t worry, we’ll just get updated information from you. It’s also important to note that once your pre-approved you will want to avoid making any large purchases, like buying a new car, putting furniture on a credit card, opening a new credit card etc. as these actions could affect your credit and therefore your pre-approval. Changing jobs can affect your pre-approval, so keep that in mind while house hunting.
Now that you’ve got a better grasp on the distinction between pre-qualification and pre-approval, contact our mortgage team, or call our mortgage line at 269.544.3105 . They can help get you started on the path to the house of your dreams.