Difference Between Getting Pre-Qualified or Pre-Approved for Mortgage

It is advised for the home buyers to secure a mortgage loan prior to placing an offer for the purchase of a property. The question is how can a person do this? Do you need to get pre-approved or pre-qualified?

Individuals can use this guide to find out all about these two options and the differences between these options, this will help the individuals to decide which one is the best for you.

Pre-Qualification

A person needs to provide all his/her information about the income, credit history, finances and employment to the lender, into order to get pre-qualified for a mortgage. The banker will check the information that the person have provided and come up with an estimate of much a person can borrow and what interest rate he/she will have to pay. The bankers make no commitment, although the letter has purely informative purpose. It is designed to help a person of getting an idea of how much an individual can afford to borrow in order to finance the purchase of a house.

Pre-Approval

A person needs to provide full set of his/her documents, credit score, saving and history, in order to get pre-approved for a mortgage loan. If a person is self-employed, he/she will be asked to give tax return documentation and possibly all the financial statements as well. Once the banker obtains all the documents that are necessary, the lender will calculate the debt income ratio of the person and create a profile for the individual. In addition to evaluating at the credit score a person have, the lender will check the credit history of a person in detail. If a person gets approved, the banker will issue an official letter to certify this, with the letter they send to you they assure an individual that they will grant them with a loan in case he/she will apply for it.

The Better Option

The difference between both of these options is quite clear, with pre-approval, a person gets an official documentation which states that he/she will be granted a loan when they granted an application wile with the pre-qualification; a person gets an estimate of the loan size and the interest that a person can qualify for.

In a nut shell, it can be securely said that getting pre-approved for a mortgage loan is the better option.