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As you enter the home mortgage world, chances are you are frequently coming across two terms: pre-qualified and pre-approved. They sound similar enough for someone to believe they are just different terms defining the same steps – but they are not. Read on to discover the true difference between “pre-qualified” and “pre-approved” and why you need to know how they apply to you!
What Does It Mean To Be Pre-Qualified?
In simple terms, a mortgage pre-qualification is less concrete than a pre-approval. Pre-qualification is derived from information that you provide to the lender without any real documentation. It is a compilation of your basic financial information from which your lender can estimate how much you will be able to borrow. It is an informal process that can be done online or the phone even. It is not as promising as a pre-approval but can help when you are putting in an offer for a home.
For first-time homebuyers, getting pre-qualified is considered a smart first step to take as it introduces you to all the mortgage options available and gives you a clear picture of where you stand financially.
What Does Pre-Approved Mean?
Getting pre-approved is the next step when it comes to entering the world of mortgages. It is more definitive than being pre-qualified and requires concrete documentation by the lender. The lender uses this information to perform a thorough credit check and carry out an extensive financial background check. The lender will then offer pre-approval for an amount calculated through the information you provided.
For a buyer, this is a great advantage to have as it makes them one step closer to acquiring a home that fits within that price level. Sellers give more weight to potential buyers who are pre-approved and are more prepared to negotiate and move forward with the process with them.
What You Need To Know For Both
Every lender has their own criteria for pre-qualifying and pre-approving borrowers. Usually for pre-qualifying, you will just need to fill out a quick form and can get qualified in less than an hour!
In order to get pre-approved, your documentation needs to contain bank statements and recent paystubs, along with a report on your assets and monthly expenses as well as your W-2s.
Your lender will usually require a week or so to review all the information that you provided and then come up with an accurate figure for you.
Once you are preapproved, you will receive a pre-approval letter from your lender which will state the loan amount you have been qualified for along with an estimate on interest. The letter is valid for 60-120 days and any offer you make during this time will hold weight in the eyes of a seller as it shows you are officially backed by a lender.
Get Started Buying Asheville Real Estate
If you are looking into Asheville real estate and are ready to start searching for your dream home, contact our agents at the Troy Flack Group. As the leading realty group in the region, our team is committed to understanding where you stand in the mortgage world, what your next steps are, and being there to help you proceed.