There is no shortage of moving parts when it comes to getting approval on a mortgage. One specific area that homebuyers have problems with is failing to understand the difference between being qualified for a mortgage and being approved for one.
The one thing you need to understand is that just because you’re prequalified for a mortgage, it doesn’t mean you’re going to get one. However, if you are preapproved, then it’s a green light from most lenders.
So what is the difference between the two?
According to Realtor.com, in general, a lender who prequalifies a buyer discusses a buyer’s credit, income and assets with them. A lender who preapproves a buyer runs their actual credit and verifies their income and assets. That’s a major difference since agents and sellers view a preapproval as a more firm start to the home-buying process.
Your loan would be submitted for preliminary underwriting, which normally takes no longer than 24 hours. Your mortgage consultant would then provide you with a preapproval letter that defines the loan amount you are approved to receive.
Preapprovals are normally good for a 120-day period, so it’s important to begin your home search with your real estate professional as soon as possible after receiving your preapproval letter.
A mortgage prequalification is an initial assessment of a potential buyer, and often it’s not worth the paper it’s written on.
But a preapproval goes deeper and involves a more thorough look into your income and expenses, including a look at your credit score.
The article goes on to state that there’s no harm in getting prequalified – it’s a good gateway to buying a home. But to lock down that home, focus on getting preapproved.
Why? First, a buyer can confirm the sample monthly payment that they may own when they close, and they can get an idea of the home’s price range. Then, they can determine if there are any potential unknown credit issues that may need to be addressed prior to purchasing.
The entire home purchase process helps everyone get in line with the prequalified versus preapproved streamline. If all parties involved are aware of the distinction, it helps everyone play their role to the best of their ability.
So what is the takeaway? Understand the difference and concentrate your energy on being preapproved. Once you do that, you are on the road to becoming a homeowner!
Source: www.realtor.com
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