Pre-Qualification vs. Pre-Approval are probably the most confusing terms especially to first time home buyers. It's complicated by the fact the general public can also be misinformed. We want to keep it simple here at Educate Your Way Home and let you know what we can do to set the record straight!
Basically an over generalized estimate of what you might be able to afford. It is often vague because specific program details are not taken into account. It leaves most people with inaccurate information. It usually doesn’t take into consideration credit scores or reports, income verification, down payment verification, debt to income ratios, and more importantly accurate interest rates. See, wasn't this description vague? That's because Pre-Quals, as some call them, are vague as well.
At Enhanced Benefits it's recommended if you are ready to purchase a home to get fully pre-approved. You’ll need to find an accurate price range so you don’t waste your time focusing on home outside of your budget. Even more troublesome, is searching for months at properties outside your price range and then finding the perfect home, which you now realize, as you are writing an offer, you can’t afford. By getting pre-approved in the beginning, you can make sure are looking at homes you can comfortably afford.
When you make an offer, part of that is a customized, pre-approval letter from your lender with such things as offer amount and possibly other additional loan information depending on your situation. They have reviewed your credit, income and debts. This will let the seller know you are a serious buyer. Whether you are the only offer, one of a few or one of ten, you will be taken more seriously and your offer has a far better chance of being selected. If you have to scramble at the last minute to get your pre-approval in order, you could miss an offer deadline. Educated buyers know that a pre-approval is crucial in making their home buying experience not only successful, but also key in reducing stressful moments.