Know the Divergence that Separates Pre-Approved and Pre-Qualified Mortgage

In the real estate industry, it is important to remain prepared for the future as transactions can be made at any time. Home buyers who are looking for their dream property can come across it anytime therefore without necessary preparations they would lose a lucrative deal. Buyers often are mistaken into believing that if they get pre-qualified for a loan this automatically means that they are pre-approved for it by the lender but a lot of difference lies between the two terms.

The Pre-Qualified stage

The first and foremost step in the loan process is to get pre-qualified. Crossing this initial step can be an easy deal. All a borrower has to do is to give the financing institute or the lenders a status about his financial condition, which may include the debts, assets value and his income. After evaluating the provided information, the lender can give a fair idea of the amount that you may qualify for. Usually no cost is involved in determining the pre-qualification value and this information can be conveyed to the borrower over the phone.

This step helps the borrower to discuss any requirements or needs related to the mortgage. The lender or the financing institutes professional then explain all the possible options that may suit his needs and preferences. Being a quick procedure it is based on the information that is provided by the borrower to the lender. Thus the amount of mortgage that you can qualify for is not always the exact amount.

The Pre-Approved stage

The next stage after pre-qualified is the pre-approval stage. This stage involves a lot of paperwork and the borrower is required to complete the mortgage application. The lender performs a broad check on the financial background of the borrower including his current credit score. At this stage, the financing institute professionals can tell the exact amount for which the borrower is approved. After this step you would have good knowledge about the interest rate and in some instances, you can even lock-in a specified interest rate.

By having a pre-approved loan in hand, you can easily look for a property that is priced at an exact amount of the mortgage or below it. When dealing with a prospective seller, this option can put you at advantage as they will know that you have pre-approved mortgage.

An additional advantage of pre-qualification and the pre-approval step is that his process can make it easy for the home buyers to find a property that can be easily afforded by them. This way, they would save their time in looking at properties that are beyond their financial approach. In the competitive real estate market, making a serious offer as a buyer can help you to buy a property of your choice along with negotiating about its price as well.

So be warned as both these terms differ from each other. Do not assume that you would get the amount of loan you pre-qualified for because you can be pre-approved for a lesser amount of mortgage. By mistaking both the terms as same, you could potentially lose on your dream home.

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