It’s a new year and you and your family are checking out your options for moving into a new home. Where do you start? Some might think that finding your new home is the first step, but we recommend seeking pre-qualification for a home loan from a reputable lending institution as your first step. As you seek help with securing a home loan, you might be asking yourself – What is the difference between pre-approval and pre-qualified?
Pre-qualifying for a Mortgage
Becoming pre-qualified for a home mortgage is the first step on the long path to owning a new home. But, with diligence, perseverance, and accurate information about the home loan process, you and your family can go from old and boring home to new home in as little as a few months. Pre-qualifying for a home loan is the first step you must complete with your lending institution and consists of you providing information to the bank about your finances. This can include debt, assets, your total household income, and more.
Mortgage Options for a New Home
The bank you’re working with will run a credit check on you and any other co-signers on the loan application. A good bank will also talk about what in most cases are several mortgage options. This is an important step in the process, as it will determine the best mortgage package and will help to guide you in your search for a new home. It’s also important to consult with your accountant or a reputable financial adviser to ensure you’re not getting more home than you’re qualified for. Becoming pre-qualified for a mortgage allows you and your bank to know how much credit you can get, so that you can start searching for and purchase your new dream home.
Home Loan Pre-approval
After completing the initial step of pre-qualification, you will then proceed to the pre-approval process with your bank. Pre-approval is an internal process done by your lending institution that is like a guarantee that they will loan a certain amount of money to you. Once the bank has calculated the amount of money your finances qualify you for, they will then inform you in an official capacity that you are pre-approved for a loan. Pre-approval is the process of the lending institution determining that you’re worth a certain amount of credit and then definitively informing you of the precise amount of the loan you’ve been approved for. Your home search begins!
Final Approval for a Home Loan
We know it’s an exciting time when taking the necessary steps to secure an appropriate home loan and to search for homes and attend open houses. But the pre-qualification and pre-approval steps are not the end of the overall home buying process. It’s important to keep in mind that your lending institution will need to approve the home you’re seeking to buy, based on its appraised value. They will also perform another credit check on you and your co-signers to ensure that your financial worthiness remains acceptable. We strongly advise to not open additional credit card accounts at this time, even though you might want to start shopping for your new home’s furnishings!
Thank you for reading our real estate and homeowners’ blog. We are part of the Weichert Realtors – Barton Harris & Co. Family and we’re happy to have helped you gain a better understanding of getting a home loan and to answer the question – What is the difference between pre-approval and pre-qualified?