Updated: May 7, 2020
If you’re planning to buy a home, and you’ll be taking out a mortgage, you absolutely must obtain a pre-approval letter from a lender before you begin. No ifs, ands or buts.
So, what’s the difference between a mortgage pre-approval and a pre-qualification?
A mortgage pre-qualification is a ballpark number given by a loan officer (or mortgage broker), based only on a few bits of information you’ve given them. You tell them your salary information, total assets, and a credit score—but you don’t have to provide any documentation to back this information up. Because this number isn’t corroborated with solid information, it’s not a real commitment to lend; and therefore means very little to a seller who may be considering your offer.
On the other hand, a pre-approval is a written commitment from a lender, which includes a specific amount of money the buyer may borrow. You must provide practically all the same paperwork you’ll need for the actual mortgage application (which incidentally gives you a head start on the mortgage work, so that’s good!). You’ll need to put your hands on your W2 and 1099 forms for the past year, bank and investment statements, as well as other official forms. The bank or broker will also run an official credit check. After this paperwork is complete, the lender will write an official pre-approval letter. It gives you an accurate idea about what you can afford, and we’ll use it to help you build the best offer possible for the home of your dreams.
If you’re ready to get pre-approved today, stop and take a breath. Are you looking for homes in the next 2-3 months? If you are, then go ahead and get approved. However, pre-approval letters are only good for 60-90 days, so if there’s a time lapse, you’ll need to renew your pre-approval before making an offer to purchase a home.
A final note: you are not obligated, legally, morally or otherwise, to obtain your mortgage from the same lender who wrote your letter. Sure, it greases the wheels a bit for you, but as long as you keep your paperwork up to date and within easy reach, it’s no more trouble to get your loan elsewhere.
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