Up to this date, many people are still confused when it comes to distinguishing pre-approved and pre-qualified mortgage. And if you are one of them, it’s important to understand the difference before choosing your mortgage broker. A lot of home buyers believe that these terms are the same thing. But no. How are they different from each other? Let’s find out.
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What Is Pre-Approved Mortgage?
Before the pre-approval procedure begins, lenders focus more on the financial position of the applicant. They will begin to analyze the credit scores of the borrowers and complete the requirements before approving mortgage applications. Lenders will also indicate the amount the borrower can get once approved. That will determine the interest rate to be paid after closing the deal.
Usually, interest rates can still be changed, depending on the broker you applied with. But there are pre-approvals that lock in fixed interest rates so you also need to consider that. It’s also important to know that pre-approved mortgage is a serious commitment. So make sure you are aware of the conditions made by the bank that’s lending you money. Plus, it’s easier to shop when you understand the requirements of lenders.
What Is Pre-Qualified Mortgage?
The first thing you need when looking for an ideal broker is getting pre-qualified. To pass this step, you need to provide your financial overview to the bank such as your assets, income, and debts. Basically, your lender will not look at your credits or analyze if you can really buy a home. The pre-qualification process involves a conversation on the phone or online for free.
In addition, lenders will provide approximate mortgage that borrowers can afford before they get pre-qualified. But since this is only a rough estimate, expect that there will be a comprehensive investigation in the future regarding your finances. Remember, this mortgage is not a guarantee, and lenders are not yet committed to lending you a certain amount of money.
How Are They Different and What Is The Importance?
There are some advantage when you get pre-qualified, but this won’t be essential when shopping for properties. Most of the time, a prospective seller will choose buyers with pre-approved mortgage. The fast-moving real estate industrytoday also provides various offers to help home buyers decide which the best deal for them is.
Pre-approved mortgage helps in ensuring that you get the perfect offer you need from the prospective seller. Pre-qualified mortgage doesn’t guarantee you when it comes to buying a home. In fact, you may encounter financial issues with a pre-qualified mortgage. So before you decide to buy a new property, it’s essential to understand the difference between pre-approved and pre-qualified. That would give you a more sound decision in the future.
The main point here is that, after getting pre-qualified, make sure that you get pre-approved to ensure that you can afford your dream home. By simply understanding these home ownership terms, you can avoid potential pitfalls in securing your mortgage. So now that you know the difference between these two, next step is finding the right mortgage broker in your locality.