Mortgage Explainer: PreQualification vs. PreApproval
2020 11-18 | NFM TV
When looking for a new home, you will hear the terms 'pre-qualified' and 'pre-approved'. Sometimes they are used interchangeably, but they’re actually quite different. In our latest Mortgage Explainer, we illustrate the distinction and how you can use both to give you a competitive edge throughout your home buying journey.
Full Transcript is Below:
- [Instructor] When looking for a new home, you will hear the terms pre-qualified and pre-approved. Sometimes they are used interchangeably, but they're actually quite different. A pre-qualification is simply an initial verification that you have the income and assets to afford a home up to a certain amount. Your loan originator may run a credit report and look at your pay stubs and W-2 forms. This helps narrow down your home search and identify the loan program that might be right for you. A pre-approval is an application for a mortgage. It's a more extensive look at your finances and credit worthiness. The loan originator will officially submit your file to Processing and Underwriting, who decides on your loan. Underwriting will perform a complete analysis on your credit, debt ratios, and assets. They will also verify rent and employment where necessary. If everything is in order, you will receive an offer to lend up to a specific dollar amount. This prepares you to receive final approval to purchase a home once you have made an offer and all additional requested documentation is received. Getting pre-approved is a smart step when you are ready to put an offer on a home, because it shows the seller you are more serious and potentially have a stronger offer than someone who is not pre-approved.