Pre-Qualification
VS. Pre-Approval
As you begin the home buying process, you will hear the terms pre-qualification
and pre-approval. While both give some indication of a buyer’s
ability to obtain a mortgage for a certain amount, there are considerable
differences between the two. These differences are essential for
a prospective home buyer to understand.
Pre-Qualification:
 Pre-qualification
is a conditional establishment of a borrower's qualifications for
a mortgage loan of a specific dollar amount or ability to make
monthly payments at a certain level based exclusively on debt to
income ratios. Prequalification is only an estimate and is subject
to verification, credit history, property appraisal and other factors.
Loan
pre-qualification does not normally include an analysis of a buyer’s
credit report or an in-depth look at their true ability to buy
a home. The term means that someone has taken a general look
at a buyer’s income and expenses and plugged them in to a
debt-to-income ratio formula.
Pre-qualifying
before a buyer starts looking for a home gives only a general idea
of the price range one can afford. It will not nail down
an interest rate. Knowing, in advance, how much a buyer can
afford to spend will help avoid common mistakes home buyers make,
including bidding on homes that are too expensive for their budget.
Prequalification
has many benefits. It gives a buyer an idea of how much house they
can afford. Additionally, a buyer can become pre-qualified without
having the lender check their credit report. It is important
to understand that pre-qualification does not mean approval.
Pre-Approval:
Pre-approval
is the process by which a potential home buyer secures a guaranteed
mortgage approval before making an offer on a home. A lending institution
grants, in writing, a guarantee for a loan of a specific dollar
amount.
Getting
pre-approved for a loan is more complicated than getting pre-qualified
because it requires that you actually apply for the loan. The lender
will ask for copies of your tax records, pay stubs, and bank records,
and will then pull up a copy of your credit report, and check for
any inconsistencies in your work or credit history.
When
you are pre-approved for a mortgage, it means a lender has looked
closely at your credit report and income and determined that you
qualify for a loan. The lender will tell you the maximum amount
of the loan it will make and exactly which loan programs you qualify
for. Your lender will also discuss the interest rates it will offer
for different types of loans.
The First Step
To take the first step toward home ownership, please contact one
of our agents and we can immediately initiate the pre-qualification
process on your behalf. From initiating your loan application,
all the way through the closing of your new home, Austin Area Home
Store will be with you every step of the way. Our agents
are standing by 7 days a week to answer any questions you may have. Call
us now at 512-218-4886 or toll free at 888-878-5388 and
take the first step on the road to owning your new home.
For more information on how Austin Area Home Store can simplify
your loan process, please visit our financing page.
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