Mortgages: Pre-Qualification vs Pre-Approval? What is the Difference?

Mortgages: Pre-Qualification vs Pre-Approval? What is the Difference?

So which is better and which should you get… pre-qualification or pre-approval?  What do they mean and what is the difference?  You often hear the two terms thrown around when talking mortgages and financials so let’s break them down.

First just know these two terms can be interchangeable to some loan officers and lenders so be sure to ask for clarification.

Pre-Qualification is considered to be the easier of the two and involves less information.  Let me explain.  First in this scenario you provide your limited information to either a loan officer or even a website and almost immediately you get a response.  Either yes you are pre-qualified and for how much or declined.  However please know that there was no verification involved and this is the key difference.  You could have lied to a computer or loan officer and based on your information they make a decision.  When you get a letter from the lender with a pre-qualification it usually is not taken as seriously due to the lack of verification.

Pre-approval on the other hand is the same except there is actual verification.  Now instead of just entering your income you will need to provide proof of your income such as bank statement, tax returns and pay check stubs.  If you have assets those will need to be verified as well as your employment.  As you can see this takes more effort however due to the verification it carries more weight in comparison to a pre-qualification.

So what does this actually mean to you when you start shopping?  A pre-qualification will have a bit less meaning than a pre-approval to a seller who receives your offer.  Knowing there has been some verification involved will make the seller more confident in a pre-approval as opposed to a pre-qualification.

Now do you want to take it up a notch and be fully approved?  This is even more verification and even involves the lender’s underwriter.  Just know at this type of approval you are fully approved meaning everything is verified and all questions the lender may have to give you a loan have been satisfied.  At that point the only thing between you and a loan is finding a home.  You can read more about fully lender credit approval here.

With a heart of a teacher I look to educate my clients about the process of buying, selling or renting real estate.  I strongly feel an informed and educated consumer will make better decisions and be less likely to be taken advantage of.

Have questions about this or other topics, don not hesitate to contact me.

Don’t forget to “LIKE” this video and be sure to Subscribe to my YouTube Channel as well.

Luis Cuevas, Realtor®

RE/MAX Cross Country

1990 Justin Road

Highland Village, Texas 75077

(214) 783-0535

Luis@MakeNorthTexasHome.com

Check out my website for more helpful tips:

http://MakeNorthTexasHome.com

Subscribe to my YouTube Channel:

http://Youtube.com/MakeNorthTexasHome

Follow me on Facebook:

http://Facebook.com/MakeNorthTexasHome

How Long Does It Take To Get Pre-Approved For A Mortgage?

How Long Does It Take To Get Pre-Approved For A Mortgage?

How long does it take to get pre-approved?  Getting pre-approved can be done in a few hours if not a day but it is all about being prepared.  Being prepared with all the documentation and information in hand will expedite the process for you and the loan officer.

Be sure to have all your information ready so there are no delays.  Some of the items you will need are your tax returns, pay stubs, bank statements, 401K statements, ID, and any other important financial documentation you plan on having the lender take in to consideration. 

Having those documents and information in hand will make the process much smoother.  Just know the loan officer will gather the information and make a determination as long as there are no issues.  Some will even go as far as verifying your income if there is something in question.  However most lenders will get it done the same day.  

Keep in mind the pre-approval is different than a pre-qualification.  Pre-qualification generally involves no verification so it is usually instantaneous.  Pre-approval usually means there is a form of verification, which makes it take longer to do but has so much more meaning behind it.  A seller is going to take a person who is pre-approved much more serious than one who is just pre-qualified.

With a heart of a teacher I look to educate my clients about the process of buying, selling or renting real estate.  I strongly feel an informed and educated consumer will make better decisions and be less likely to be taken advantage of.

Have questions about this or other topics, don not hesitate to contact me.

Don’t forget to “LIKE” this video and be sure to Subscribe to my YouTube Channel as well.

Luis Cuevas, Realtor®

RE/MAX Cross Country

1990 Justin Road

Highland Village, Texas 75077

(214) 783-0535

Luis@MakeNorthTexasHome.com

Check out my website for more helpful tips:

http://MakeNorthTexasHome.com

Subscribe to my YouTube Channel:

http://Youtube.com/MakeNorthTexasHome

Follow me on Facebook:

http://Facebook.com/MakeNorthTexasHome

Advantages Of Getting Full Credit Approval

Advantages Of Getting Full Credit Approval

What is the advantage of getting full credit approval?  First let’s break down the types of lender approvals so we know where we stand.  Remember first there is a qualification or even referred to as pre-qualification.  In this case a buyer is pre-qualified for a mortgage by having given their information and determined to be able to qualify for a mortgage.  However please note there is no verification if the information given was actually true, so this type holds very little weight and I do not recommend it.

Next is the pre-approval or approval of a mortgage, in this case the same happens but there is verification of the information provided.  So the income is verified with pay check stubs, tax returns and even banks statements, so this is the preferred way to be approved for a loan.

Full credit approval however is the ultimate form and has really become more popular as the market has become more competitive.  In this case the approval goes as far as fully approving the buyer by the lender’s full underwriting standards.  In this case the buyer is not only review and verified by a loan officer but also the lender’s underwriter, which is the ultimate decision maker.  

Keep in mind this takes up time, the lender’s resources and fills the lender’s pipeline with other buyers who may already have a house under contract.  This is something big the lender’s are doing and it s an enormous help to a buyer when it comes to competing for a home in a multiple offer situation.  The only thing missing from the lender actually giving you a loan is the contract on a home.

So how is this stronger?  You are fully approved, meaning you almost hold as much weight as a cash buyer!!!  You are guaranteed as far as your credit approval is concerned.  That is big, and getting this done is recognized when it comes to making your offer because now the seller doesn’t have to worry if you will not qualify down the road.  The reality is you are ready and approved so your offer holds weight and they are more likely to take your offer over others just for that reason.

Getting fully credit approved takes time and the lender’s resources, so when you have a lender willing to do this realize how important it is.  This means that not only are they serious but they know what it takes to help you win those multiple offer situations.  If you have the opportunity this is the best route to take, it will put you ahead of the rest of the buyers and get you in a home that much fast.  When I tell people how to win in multiple offer situations this is my number one suggestion!

With a heart of a teacher I look to educate my clients about the process of buying, selling or renting real estate.  I strongly feel an informed and educated consumer will make better decisions and be less likely to be taken advantage of.

Have questions about this or other topics, don not hesitate to contact me.

Don’t forget to “LIKE” this video and be sure to Subscribe to my YouTube Channel as well.

Luis Cuevas, Realtor®

RE/MAX Cross Country

1990 Justin Road

Highland Village, Texas 75077

(214) 783-0535

Luis@MakeNorthTexasHome.com

Check out my website for more helpful tips:

http://MakeNorthTexasHome.com

Subscribe to my YouTube Channel:

http://Youtube.com/MakeNorthTexasHome

Follow me on Facebook:

http://Facebook.com/MakeNorthTexasHome