The Key Differences Between Getting Pre-qualified For A Loan And Pre-approved

When you make the decision to buy a house, you will need to make sure you are financially prepared for this so that you can qualify for a loan. To do this, you will need to talk to a mortgage lender, and the lender might discuss with you the difference between getting pre-qualified and pre-approved. If you do not understand the differences, here are several things you should know.

What each term means

When you get pre-qualified, it simply means that the lender assumes you meet the qualifications for a loan based on the information you provide the lender over the phone. The lender will probably ask you several things but will not verify the information you give them. If the lender feels that you will most likely qualify for a loan based on your answers, the lender will tell you that you pre-qualify for a loan.

If you take this a step further and allow the lender to verify all your financial information, you will get pre-approved for a loan if you meet the requirements. If you are pre-approved, it means you most likely qualify for a loan and should not have a problem getting one.

The paperwork required

Getting pre-qualified for a loan does not require submitting any paperwork to the lender, but you will need to submit a lot of paperwork if you want to get pre-approved. You will need to submit copies of your taxes, pay stubs, and bank account details. You may also need to fill out an application and supply the lender with other types of documents.

Credit check

Finally, if you want to get pre-approved for a loan, you will need to allow the lender to check your credit. This will result in a hard inquiry on your credit report, but it is a necessary step to get pre-approved. You will not need to agree to this to get pre-qualified. It's important to note that in order to begin shopping for a house, you will need to have a pre-approval from a bank. If you do not have this, your real estate agent will recommend getting it before you start house shopping.

Getting pre-qualified and pre-approved for residential or commercial real estate financing are both important steps to take when buying a house. If you are ready to buy a house and are already pre-approved, you should contact a real estate agency to start shopping for the house that is perfect for your needs and budget.