Prequalified Vs. Preapproved – Learn The Difference

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It’s essential to understand what prequalified and preapproved terms mean when you apply for a mortgage. Some people use the terms interchangeably, but there are important differences that every homebuyer should understand. While both sound similar, only one of them will put you ahead of homebuying competition. Assume you are considering buying a house but you are short of $400,000. What’s next?
Prequalified Vs. Preapproved

Get prequalified

Many home buyers start with the prequalification step although is not a must and you may skip it if you are financially ready. The first step is to find out if you could get prequalified for a loan and find out the amount that you might expect to get. This process is called the pre-qualification process and it is based on the information you’ve submitted but was not verified by the lender. so, the pre-qualification step gives you an idea of how large a loan you’ll likely qualify for. If you are pre-qualified for a loan that isn’t a sure thing because it’s based only on the information provided. First-time homebuyers who are just testing the waters and aren’t ready to jump in are most likely to start with getting prequalified.

You can get pre-qualified over the phone, online, or in person. Contact a lender and describe your credit, debt, income, and assets. Based on this overall financial picture, the lender estimates how much you may be able to borrow and provide you a prequalification letter in a matter of minutes or hours. Although the prequalification processes vary by lender, most of them will provide you same day a prequalification letter. Most lenders do not verify the information you have provided.

Get Preapproved

Now that you are prequalified and you have an idea of the amount you might expect to get, it is time to receive a conditional commitment in writing for the exact loan from your lender. This step is the approval step that gets you preapproved for the loan amount.

While the pre-qualification estimates how much you may be able to borrow, based on a mostly informal evaluation of your finances. Preapproval carries more weight and requires documentation. To get preapproved you will have to complete an official mortgage application,  as well as provide all the necessary documentation to provide proof of your financial history and stability. The lender will then verify your income, employment, assets, and debts, and will perform an extensive credit and financial background check. The lender will ask you to provide information in the form of W-2s, a current pay stub, a summary of your assets and your total monthly expenses, and if you already own real estate, a copy of your mortgage statement and home insurance policy. This process might take a few days for the lender to verify the information. If you satisfy the requirements, the lender will send you the preapproval letter up to a specified amount.

Well, just get preapproved

You don’t have to get pre-qualified first. If you know you’re financially ready to buy and want to start home buying, you can skip pre-qualification and apply for preapproval.

Increasing your probability to win a bidding war

A pre-qualified buyer doesn’t carry the same weight as a pre-approved buyer, who has been more thoroughly investigated. Although a preapproved buyer/offer isn’t a guarantee, it shows you’re a serious buyer, which can give you leverage in a competitive market. 

Ready to get preapproved?

If you are thinking of buying a home, our partner lenders can get you preapproved. Contact me for a list of trusted lenders.

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Bassel Mokabel

Bassel Mokabel

Real Estate Agent & REALTOR®

DHS Realty LLC

Frisco, Texas

(469) 514-8755

A Licensed Real Estate Agent and a REALTOR in Frisco Texas, Serving Dallas – Fort Worth and Surrounding Areas. Bassel is a trusted professional offering a variety of real estate services – Buyer’s Agent, Seller’s Agent, Listing Agent, First Time Home Buyer, Foreclosed Properties, Luxury Properties, New Construction, Relocation, and Rentals. Looking to buy or sell a home? Call Bassel for all your real estate needs.

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