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Pre-Qualification
Vs. Pre-Approval
“WHAT IS THE DIFFERENCE BETWEEN
PRE-QUALIFICATION AND PRE-APPROVAL? ARE THOSE TWO TERMS INTERCHANGEABLE?
DO THEY BASICALLY MEAN THE SAME THING?”
Although
both pre-qualification and pre-approval are measurements of how much a
buyer is able to afford in terms of a loan, the differences between the
two are very important. Put simply, a pre-qualification
is a quick estimate of what a buyer can spend and a pre-approval is a
formal process in which a lender states the maximum amount they are
willing to loan based on verification of a buyer’s assets, income, and
employment. More than likely, a pre-qualification is based on a few
simple details (such as your yearly income) you
provide to the lender; for a pre-qualification, a lender does not verify
these details. On the other hand, for a pre-approval, you will need to
fill out a mortgage application with a specific lender and the bank will
take an in-depth look at all aspects of your finances: employment,
income, assets, liabilities, stocks, and cash available. Needless to
say, the thoroughness of a pre-approval makes it an essential tool in
the home-buying process—especially in today’s competitive market. In
the eyes of a seller, a pre-approval shows a serious commitment on the
part of a buyer. One thing to note about pre-approval is that it is
contingent on the home appraisal and title review.
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