Pre-approval gives you a good idea of the type of mortgage you will qualify for and the price range of homes you can afford.
It can help you:
• Know how much you can borrow.
• Confirm your ability to qualify for a mortgage based on your credit, financial, and employment information.
• Strengthen your position to make an offer on a house. Sellers are usually more willing to accept offers from pre-approved buyers.
To get pre-approved, you'll need to work with a mortgage lender. The lender will review your credit, financial, and employment information after you fill out an application and provide documentation. A fee might be involved to cover application costs.
If you qualify, you'll get a letter that says you are approved to borrow a certain amount of money and for a certain amount of time. Being pre-approved does not mean you have to use that lender or that the loan has been finalized.
Pre-qualification is not the same as pre-approval
A pre-qualification is a free test run of the loan application process that usually takes a few hours. The mortgage lender uses your credit, financial, and employment information to come up with an estimate of the mortgage you can afford. While it is a good first step to give you an idea of where you stand, and can help with planning for homeownership, a pre-qualification is only a rough estimate. When you are ready to purchase, take the time to get pre-approved. While it is a lengthier process, it is worth it.
