08/03/2020: Pre-Qualification vs. True Pre-Approval
This is the second in a series of videos and articles inspired by Mars Bank’s First Time Homebuyer live events highlighting Pre-Qualification vs. True Pre-Approval. Contact a mortgage expert to learn more about programs for first time buyers.
You’re ready to buy your first home, but you don’t know where to start! It can be overwhelming if you don’t know what steps to take and how to avoid common mistakes of first time buyers. Here at Mars Bank, we want first time home buyers to be confident with the real estate agent, seller, and themselves regarding how much home they can afford. When you decide to purchase a home, the best way to get started is to request a true pre-approval. This differs from a typical pre-qualification letter that many lenders provide.
Pre-qualification or Pre-approval… What’s the Difference?
A pre-qualification is a conversation that the mortgage loan officer has with the buyer obtaining verbal information about their income, their assets, and their liabilities. In this process, a lender issues a pre-qualification letter that the buyer can present to the seller (through their real estate agent). However, because the information is only verbal and not documented, the pre-qualification letter is really just a guesstimate of for what the buyer could qualify in a mortgage. While it is helpful, it does not reflect a true estimate of the potential mortgage qualification.
A pre-approval starts with a mortgage loan officer taking an application from the buyer. Once that application is completed, the buyer provides documentation about their income, their assets, and their liabilities (debts or other loan obligations). The lender then underwrites (researches and confirms the information) for the pre-approval. This process is the most accurate estimate of what a buyer can qualify for when finalizing the application for a mortgage loan. This method is highly recommended by Mars Bank.
Confidence in the Process
Without the documentation, the pre-qualification does not have the same weight as a pre-approval. The best thing that a buyer can do before heading out to view homes is to request a pre-approval. The result is confidence going into the home search and transaction.
Mars Bank wants to help you understand the home buying process. If you have questions about the difference between pre-approval and pre-qualification, contact Mars Bank today to speak with a representative! We are here to help give you the confidence you need when applying for a loan.