Understanding Mortgage Preparation: Pre-Qualifying vs. Pre-Approval
Don't even think about stepping a toe in the real estate waters if you haven't done your homework!
That's why the most crucial step in the home buying process is finding out exactly how much house you can afford.
One of the biggest mistakes in home buying here in Staunton, VA is the assumption that pre-qualifying is the same as loan pre-approval. Not so!
What is Pre-Qualifying for a Mortgage?
You provide your lender or your banker information about your overall finances.
- Your income
- Your assets
- Your debt
After evaluating your information, the lender can then give you an idea of the amount of mortgage payment you can afford.
Generally, there is no cost involved.
Pre-qualification simply allows you to discuss your goals or any needs you have about getting a mortgage.
Your lender explains the mortgage options available to you and makes recommendations on the type that's best suited for your financial situation.
Because pre-qualification is based only on the information you provide, your pre-qualification isn't assured. That's why it does not carry the same financial weight as mortgage pre-approval.
What is Mortgage Pre-Approval?
If you're pre-approved and submit a bid on a house, the seller knows he or she is dealing with a serious buyer, one who is very close to getting an actual mortgage.
To get mortgage pre-approval, you usually have to pay an application fee to complete a mortgage application.
Just like with pre-qualification, you supply your lender with your financial details. The difference here is that your lender will perform an extensive financial background check and on your current credit rating.
It's this research that allows your lender to tell you the specific amount of mortgage payment you can afford.
charged with mortgage pre-approval.
Further, with pre-approval, you get a conditional loan commitment for the exact loan amount the lender is willing to finance. This commitment is given to you in writing.
That's a huge plus when working with a seller because they know you are one step closer to getting a mortgage!
For you, the advantage of both of these steps is that you know where you stand financially in buying a home.
You won't waste time looking at a home you can't afford to buy. From a seller's perspective, he or she doesn't have to waste time either while you secure financing.
And that alone could prevent you from losing the house you want to another potential buyer!
Lilly Title & Settlement is a full service title and real estate closing firm in Staunton, VA. We service both Staunton, Waynesboro, and the surrounding area. When you're ready to close on a real estate property, call us!