March 1, 2013

Pre-Qualified vs. Pre-Approved?

Charleston Sounth Carolina Real Estate Mortage Credit ScoreHave you ever heard someone say they were pre-qualified for a mortgage only to find that the home of their dreams never materialized because their loan was not approved?  This is because there is real meaning of the word difference between the terms pre-qualified and pre-approved.  Starting off on the right foot during the lending process can make the difference in whether your dreams become your reality.

Pre-Qualified: The initial step in the mortgage and home buying process is typically pre-qualification and in general is fairly simple.  During this stage your the lender will request information about your overall financial picture.  They will want to know about all source of income, any and all outstanding debt and be provided with a list of your assets.  The information you supply at this stage will be evaluated and provide the lender with a picture of your "financial health".   Once the information is evaluated the lender can give you an idea of the mortgage amount for which you qualify.

There usually is no cost for this quick pre-qualification which can be done over the phone, on the internet, or in person.  Because it’s a quick procedure based only on the information you provided to the lender, the pre-qualified amount given is not a sure thing, but rather the amount you might expect to be approved for.

At this point, a lender can explain your various mortgage options and recommend the type that might be best suited to your situation.

Pre-Approved: The next step, Pre-approval, is much more involved beginning with the completion of an official mortgage loan application, and (at times) an application fee.  You will also be asked to submit to the lender the necessary documentation to perform an extensive check on your financial background and current credit rating. 

From this information and evaluation the lender can tell you the specific mortgage amount for which you are approved. They will discuss interest rates you will be charged depending on the loan type made and in some cases, you might be able to lock-in a specific rate. With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level.Pre Approved Charleston SC Dream Home

Pre-approval puts you at a great advantage when searching for a home to purchase.  The lender will provide you with a loan commitment letter stating the amount for which you are approved.  This letter of commitment is a valuable tool in the negotiation process, putting a seller on notice that you are a serious buyer and are one step closer to obtaining an actual mortgage.

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