Pre-Qualified vs Pre-Approved. What is the Difference?
One of the most common misunderstandings in the mortgage world is the difference between being pre-qualified and being pre-approved.
Many use the terms interchangeably, but they are actually very different.
Pre-Qualification
A pre-qualification is usually the starting point of the conversation.
It’s based on the information you provide about your income, debts, down payment, and goals. It can help estimate what your purchasing power could look like and give you an idea of a comfortable price range.
It is helpful for early planning, but it is not a firm approval.
Pre-Approval
A pre-approval goes a step further.
This is where income, employment, credit, and supporting documents are reviewed and verified by your mortgage broker. A pre-approval gives clear understanding of what you as a borrower can qualify for.
A pre-approval can also be used to hold an interest rate for a period of up to 130 days. This can be especially helpful in an increasing rate environment, because it allows you to lock in the best available rate now, with the opportunity for better rates later.
If you are thinking about buying, renewing, or refinancing this year and aren’t sure where you stand, I am always happy to help walk you through the process and answer any questions you might have.
