Pre-Qualification or Pre-Approval: Which is Best?
When it comes to deciding between getting pre-approved or pre-qualified for a home loan, there are key differences that every homebuyer should know and understand.
Pre-qualifying is a first step (which you don’t necessarily need to take, i.e., this step can be skipped if you prefer to do so). Getting pre qualified simply gives you an idea of how large a loan you COULD likely qualify for.
Pre-approval is what is needed in order to take out a mortgage. During the pre-approval process you will be required to provide proof of your financial history, income, and credit. All of this will be verified by the lender.
In other words, pre-qualification estimates how much you may be able to borrow, based on an informal evaluation of your finances. Pre-approval carries more weight and requires documentation.
What happens if I get pre-qualified but not pre-approved?
We have seen situations where a buyer thought that the two words meant the same and so we’ll take the buyers through multiple homes, they fall in love, and we start talking about writing an offer only to discover that the buyer was pre-qualified and not pre-approved. When a discovery like this is made at the time of writing an offer it is possible to pull it off if we act quickly and the buyer has good credit, but unfortunately that is not always the case.
What are the benefits of getting pre-approved?
First of all, if you satisfy the requirements, you’ll get a pre-approval letter, which states the amount and type of mortgage the lender is willing to offer, along with the terms. Showing this letter at the time of making an offer helps strengthen the offer because then the home seller knows that you’re serious and that you can afford this home with 100% certainty. This sort of leverage is key in the type of real estate market that we are experiencing today in West Michigan.
Where do I go to get pre-approved?
You can apply to get pre-approved for a mortgage at any bank or lending institution. Although rates are pretty much the same across the board, we do recommend calling around. There are some variations especially when you get into different types of loans. We do not get any kickback from our lenders for sending clients their way (in fact it would be highly illegal for this to occur), but we do have a handful of lenders that we know and trust and have had excellent experience working with so if you would like us to point you in their direction, feel free to reach out anytime to Santiago@kw.com or Kristyh@santiagoproperties.us You can also text or call us at 616-337-0564.