Written by Corrie Baker
So what IS the difference between prequalification vs. preapproval?
Prequalification happens first. Being prequalified means you may potentially receive a loan of the amount stated. At this point, you’ll provide specific, requested information to the bank. They may give you a rough estimate on a loan amount. Assuming that all information you’ve provided the bank is accurate and truthful, you may move on to the next step. Please note, this does not mean the lender has agreed to anything. It simply means you’ve started the process. The bank is checking to make sure you are qualified for the loan.
If you are indeed qualified, you’ll move on to the next step: preapproval. A preapproval means you’ve undergone an extensive financial background check and are qualified. This check includes your credit history, banking statements, current credit score, debt ratio, tax returns, employment verification, income, etc. This means the lender is willing to give you a loan. At this time, they will provide you with that oh-so-wonderful preapproval letter we mentioned in a previous post. It will give you a more defined loan estimate. This is exactly why we think having preapproval makes the home-search easier. It gives you pretty well-defined financial parameters.
Preapproval is still not approval, though. Only after you have made an offer on a house will you be able to come back to the bank and get an actual approval on a loan. Brandon Cornett of the Home Buying Institute said it best:
In order to reach this stage, you would need to give your mortgage company a copy of the purchase agreement. You’ll also go through an extensive underwriting process that could take up to 30 days. The lender will probably require a home appraisal as well.
If you have any addition questions about prequalification vs. preapproval, feel free to give us a call. We’d also highly recommend reading the rest of Brandon Cornett’s article on getting preapproved for a loan. Remember, our knowledgable agents are here to help you through every step. They treat you like a part our team because we believe together, we soar.
To read the previous blog, click here.