Home Buying Process
Financing: Pre-Qualification vs. Pre-Approval
Pre-Qualification and Pre-Approval are two often misunderstood terms that become important when buying a home.
Pre-Qualification is a broad picture, which is given by a lender or bank, of your financial situation. Pre-Qualification is often done over the phone, without a credit check, and is not a guarantee you will be able to receive a loan. It can be a great tool to narrow down what price range you would like to shop in. It is a free service and you are in no way obligated to get a loan through the bank or lender. Though we do not require it of our clients, it is recommended early on in the home buying process.
Pre-Approval is a much more precise view of your home buying abilities. Pre-Approval includes credit checks, employment history, investments, assets and liabilities. basically everything that is needed to issue a loan. Because of the cost and effort that goes into pre-approval, we do not recommend this process be taken lightly. You want to be sure you are ready to purchase a home in the near future before you begin this process.
Pre-Approval can also be a great negotiating tool, because the seller knows you are ready and able to purchase the home. Furthermore, sellers of high-priced homes often require pre-approval before they will allow showings on the property to prevent people from sight-seeing. Lastly, Pre-Approval allows you to shop with confidence, knowing you will be able to purchase the home of your dreams.