Mortgage qualification is a process where you input your financial information to a lender to determine if you meet the basic requirements for a mortgage. This review is typically done online or over the phone, and it involves assessing your income and debt. Based on this information, the lender will give you an estimate of the amount you could potentially borrow.
Mortgage pre-approval, on the other hand, is a more rigorous process that involves a lender reviewing your financial information in-depth and providing you with a written commitment to lend you a certain amount of money. To get pre-approved, you'll need to complete a mortgage application and provide documentation of your income, assets, and debts. The lender will also run a credit check and verify your employment.
The importance of getting a mortgage pre-approval cannot be overstated. Here are a few reasons why:
- Helps you determine your budget: With a pre-approval, you'll know exactly how much you can afford to spend on a home. This will help you narrow down your search and avoid wasting time looking at homes that are outside of your price range.
- Gives you a competitive advantage: In a hot real estate market, sellers will be more likely to accept an offer from a buyer who has been pre-approved for a mortgage. This shows the seller that you are serious about buying and that you have the financial means to follow through with the purchase.
- Streamlines the buying process: Once you find the home you want to buy, having a pre-approval can speed up the process. You'll already have completed much of the paperwork and provided documentation to the lender, which can reduce the time it takes to close the loan.
- Most lenders will provide a rate guarantee of up to 120 days. This protects you from any interest rate fluctuations during the rate guarantee period.
The mortgage pre-approval is a crucial step in the home-buying process. It helps you determine your budget, gives you a competitive advantage, and streamlines the buying process. If you're serious about buying a home, it's important to get pre-approved for a mortgage before you start house hunting.
Did you know: It does not cost you anything to work with a mortgage broker. Contact us today for our list of trusted mortgage professionals to help you get through this process.