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Mortgage Pre-Approval vs Pre-Qualification

Distinguishing Between Pre-Qualifications and Pre-Approvals: A Vital Distinction! When navigating the mortgage process, it’s essential to understand the disparity between getting pre-qualified and pre-approved. In a competitive real estate market, making the right choice can be the key factor in securing your dream home or losing it to another buyer.

Mortgage Pre-Approval vs Pre-Qualification

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.