Every task starts with a process. Suppose you want to cook a meal. The first thing is to have the ingredients, along with knowing how to use them.
Similarly, when you decide to buy a home, you can't just snap your finger and teleport to your new location. There are various ingredients you need to ensure you have, along with knowing the process of buying your preferred home.
One of the most significant ingredients to buying a home is understanding the money you can spend on your next real estate.
In other words, what loan will you get to cook up your next property? That question will be answered with a mortgage prequalified and preapproved.
Now, you would want to know the difference between pre-qualification vs. pre-approval. We will do you one better. In addition to commentating on the fight of pre-qualification vs. pre-approval, we will also tell you how they impact your home-buying process.
Let's begin.
When you first start off with the hope that "I will become a homeowner" and immediately start looking for properties, you might have heartbreak at the end. Why? Because you have not confirmed if you are eligible for a mortgage to finance your buy.
That is where pre-qualification can assist you. This is the process where lenders review your financial indicators to ensure you meet the criteria needed to apply for a mortgage. By doing so, you will know whether to expect a mortgage loan or work on improving your credit history.
Some of the things that lenders would want to know are your personal identification, income, debt, credit history, employment verification, and more. If you are thinking about buying a home and getting prequalified before that, you don't have to stop reading to find relevant documents.
During pre-qualification, the lenders don't verify the information you provide. That is one of the reasons why when you talk about pre-qualification vs. pre-approval, you are prequalified in significantly less time.
But that was seeing the bright side. If you see the other side, you would know the loan amount estimate might not be as accurate as it will be in pre-approval. That point goes to pre-approval in the contest between pre-qualification vs. pre-approval.
One thing is for sure when you go through the pre-qualification process. You will get the feel of what it will take to obtain the mortgage and move one step closer to buying your preferred home.
If you are someone wanting a more accurate loan amount and don't mind if the process takes longer, pre-approval is the way to go. In this process, lenders will want evidence of the claims you made about your financial standing.
You can use valid documents as proof for your claims. These can include:
Once you submit the proofs, the lender will start the verification process, which can take a longer time. Generally, the preapproval process can take multiple days or weeks to complete.
One would think that is a point for pre-qualification in the battle of pre-qualification vs. pre-approval, but hold on. Your patience is not wasted, as you will get much more accurate result loan estimates.
Pro Tip
You can use mortgage pre-approval to build credibility and a solid reputation with the home seller. They will know you have been through the document verification process.
We have talked about the differences between pre-qualification vs. pre-approval. But there is one thing in common. In both processes, lenders assess the risk of providing the mortgage loan.
The lender would want to know about your previous debt management and if you have a history of financial irregularities like missed payments, home foreclosures, or loan defaults. All of this can be revealed through your credit report.
Yes, if you are familiar with real estate investment, you would have the question, "Won't that impact my credit score?" To answer the question, we will once again have to start the battle of pre-qualification vs. pre-approval.
During the pre-qualification process, there is a soft inquiry by the lender to access your credit history. It will be for non-lending purposes and your credit score won't be affected.
Things change when you enter the pre-approval process. Now, the lender is looking for financial gaps and loopholes in your credit reports. This means there will be a hard inquiry, which can temporarily impact your credit history.
Pro Tip
You can wait before going for pre-approval if your credit history is not good enough.
Too many hard inquiries within a short period can decrease your credit score and make lenders think you are constantly failing to achieve a loan.
Mortgage prequalified and preapproved changes how we look at your home-buying process. If you go for the conventional home buying of starting by searching for a property, you might not know if you can afford those properties or not.
Here's what your home-buying process looks like with pre-qualification and pre-approval.
Knowing if you will meet the basic criteria for receiving a mortgage. Understand the general process of obtaining a loan.
Getting a near-to-accurate loan amount, you can expect from the lender. Take your time to resolve any issues in your credit report.
Now that you have an estimated loan amount, you can look for the properties which you can afford and budget for.
As you have already gone through the document verification process, it can shorten the timeline when you apply for a mortgage loan.
The moment that you would be waiting for will come early. You are the ultimate winner in the battle between pre-qualification vs. pre-approval, as you can remove uncertainties and delays.
This was the battle between pre-qualification vs. pre-approval. As we said, no matter who emerges victorious, you will be the ultimate winner.
After going through these processes, you can start your house search, and we have the perfect place for you to start, HAR.com. We are a reputable real estate that helps you find your preferred residence.
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