Differences Between Prequalifying And Pre-Approving A Mortgage
There is a common misconception among buyers and it is about confusing the terms of prequalification and pre-approval when it comes to applying for a home mortgage. Although I can tell you that this may vary depending on the banks and the place where you are processing, there are some general concepts that you must take into account, and here I explain them;
What is prequalification?
It is, as the name says, a stage prior to the qualification for the mortgage and the initial stage of the process. It can be as simple as filling out an online application with preliminary data without having to go to the bank or submit documentation. It can also be done by phone.
Being based on preliminary data on your income and debts does not guarantee the final approval of your loan. It can be used to bid for a property if the seller tells you to accept it. Depending on the bank, you can include or not, a complete analysis of your credit situation. In most cases, it does not include it.
What is a pre-approval?
It is the next step and a much more formal process. It requires a loan application and an intense analysis of your credit and your financial situation. To grant it, you will be asked for documentation that confirms everything you have said about your income and credits.
Usually it includes expenses, the most frequent is for the credit report. It is a document that has much more weight when presenting the offer. It shows seriousness and commitment on your part. After this, the bank could grant you the document which gives assurance to the selling party that you are an approved buyer for the purchase. When the bank grants it, the most possible is that you fully approve the purchase if nothing happens that affects the process.
Avoid These Mistakes
· Submit a prequalification offer if you are asked to pre-approve a mortgage bank. If you deny having the credit affected, or you hide information, this will only give you a false result, which when investigated could make you lose the opportunity to obtain the loan.
· Stay with the pre-qualification only. This will not serve to complete the purchase process.
· Present an expired qualification in the offer. Usually it has a term of 30 days, check and update it if at that time you do not find your ideal home.
· Believe prequalification is all they need. After that you will have a pre-approval and a letter of commitment from the bank that indicates that until the time of issuing that letter, you meet the requirements for the approval of the mortgage.
· Do not understand the process and get tired halfway. The route to reach final loan approval can be long, exhausting and sometimes even stormy. Focus on your bank officer and your real estate agent, ask the questions you have and be patient.
For the best guidance in this regard, please visit Umbrella Company Mortgages.