Decoding Difference Between Pre-Approved & Pre-Qualified Home Loans
Many potential homebuyers face the challenge of not having ample funds to buy a property of their choice. While a majority are dependent on loans, it is not necessary that a homebuyer would be sanctioned a loan amount of their choice. Hence, homebuyers are suggested to get a pre-approved home loan.
However, at times, pre-approved and pre-qualified, are two such terms that are confusing for many.
Here’s a lowdown on how the two are different:
Being pre-qualified for a home loan is one of the initial steps a homebuyer takes. In this process, the homebuyer is to provide all the details that show they are qualified to get a home loan of a certain amount. Here, a homebuyer has to provide their financial status, including income, debt and assets. Based on this information, the banks inform you about the amount of loan you are qualified to get. In case you want to know your qualification, you could visit the bank’s website or the bank branch near you. For this the bank doesn’t generally charge anything neither requires your credit report. It only needs a conversation between you and the bank representative where you could share your home-buying goal and they could suggest you the amount and type of loan that would suit you.
However, be sure that the amount discussed may not be what you might be approved for. This is just the beginning of whether or not you qualify for a home loan. So, being pre-qualified is not of the same weight as pre-approved.
What is pre-approved?
Pre-approved loans are completely different from being pre-qualified. It is the next step you take after you have pre-qualified. During the pre-approved process, you officially apply for a loan through an application, pay for the application, submit all the required documents that show your financial standing and also your credit rating.
During this process, the lender could tell you the amount of loan you could get and the interest rate. In some situations, the lender can also lock the specific interest rate.
The loan amount suggested by lender could help you look for a property that fits your budget for both down payment as well as home loan.
The advantage of getting both allows you to be prepared even before you start looking for a property. You would know what kind of property you could afford, limiting your options. Also, when making an offer, you would be at an advantage when compared to other potential buyers if you are pre-qualified and pre-approved.