Navigating the mortgage process involves the crucial steps of pre-qualification and pre-approval, and understanding the distinction between the two can be pivotal in a competitive real estate market, potentially determining whether you secure your dream home or lose it to another buyer.
What Does it Mean to be Prequalified?
Being prequalified implies that a lender has assessed your financial situation and believes you are likely to be approved for a loan up to a specific amount. To achieve pre-qualification, you provide your income, assets, and debt information, and the lender uses this unverified data to estimate the likely approval amount. While pre-qualification has benefits such as no impact on your credit score, no cost, and helping you gauge affordability, it does not guarantee final approval.
Benefits of Pre-qualification:
- No effect on credit score
- No cost to you
- Assists in estimating affordability
- Particularly beneficial for first-time homebuyers
However, despite being an initial step, some sellers may not consider your offer seriously until you’ve progressed to the pre-approval stage.
What Does it Mean to be Pre-Approved?
Pre-approval signifies that a lender has officially approved you for a specific loan amount, backed by a formal letter indicating the approved amount. Unlike pre-qualification, the pre-approval process involves providing documented financial information (pay stubs, statements, obligations, credit report, etc.) for thorough review and verification by the lender. While pre-approval does not guarantee the loan, it enhances your negotiating power, provides a clear understanding of affordability, and allows for a quicker closing process.
Benefits of Pre-approval:
- No cost to you
- Enhances your negotiation power
- Provides a precise understanding of your buying power
- Facilitates a faster closing process
It’s important to note that pre-approval doesn’t guarantee a loan; you still need to go through the underwriting process. However, having a pre-approval letter signals your serious intent to purchase, making you more favorable to sellers.
Why Opt for Pre-approval?
At Fidelity Home Group, we advocate for full pre-approvals because they are essential in today’s home buying market. Full pre-approvals distinguish themselves by allowing non-contingent offers, ensuring no major issues are overlooked, and enabling a faster closing process due to the work done upfront.
Conducting full pre-approvals involves a meticulous review of income, asset, employment, and credit documents. Although time-intensive, this process proves worthwhile, as it helps identify issues that may be missed during a mere pre-qualification, such as missed expenses, unexplained deposits, and various financial obligations.
Realtors often turn to us because our full pre-approvals enhance the competitiveness of our clients’ offers and contribute to smoother transactions, minimizing stress for all parties involved.
Next Steps – How to Get Started
To initiate the pre-qualification or pre-approval process with Fidelity Home Group, contact one of our Mortgage Experts at 888-259-2257, by email, or use our online chat below. Our dedicated team is ready to assist you on your homeownership journey.