Mortgage pre-approval and mortgage pre-qualification are two terms that a homebuyer must understand. Being able to grasp these terms will give you a big advantage when you’re considering buying a new home.
What is mortgage prequalification?
Mortgage prequalification involves getting an estimate of the amount you might be able to borrow based on financial information you provide your mortgage broker with. These include income information, a credit check, basic information about bank accounts, and your desired down payment and mortgage amounts.
The best time to get a mortgage prequalification is right at the very start of your home-buying journey – when you’re reviewing your budget. The first step in the mortgage process, prequalification is also a good opportunity to learn about different mortgage options and work with your lender to identify the right fit for your needs and goals.
Prequalification is particularly helpful for first-time homebuyers, especially those who are establishing their home-buying budget and want an idea of how much they might be able to borrow. Once you are prequalified and know how much you can borrow, you can start house-hunting.
What is a mortgage pre-approval?
Mortgage pre-approval is the next step after prequalification. It involves a thorough investigation of your income, assets, credit history, rental history and debts. Pre- approval essentially confirms your creditworthiness without having a purchase contract in place. It enables you to make an offer with confidence and gain a competitive advantage. You gain more negotiating power since sellers prefer working with those who they know can pay.
To apply for mortgage pre-approval, you’ll need to submit copies of pay stubs that show your most recent 30 days of income, present proof of identification (e.g. a copy of your driver’s license), undergo a credit check, provide bank account numbers or two of your most recent bank statements, indicate down payment and desired mortgage amounts, and submit W-2 statements and signed, personal and business tax returns from the past two years.
If you’re serious about buying a house, you should prioritize getting a mortgage pre-approval over a mortgage prequalification. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage, which makes it more likely that you’ll complete the purchase of the home.
Home sellers know that it’s very easy to pre-qualify, which is why prequalification doesn’t hold as much weight as pre-approval. When you’re pre-approved, home sellers take you seriously. They know you are determined to buy a house because you are willing to go through the rigorous process of completing the paperwork to get pre-approved.
Our team of full-time realtors at the Emmer Real Estate Group has helped many first-time homebuyers in the West Bend area. Let us guide you through securing your mortgage prequalification or pre-approval.
We pride ourselves in our honesty, transparency and integrity when working with clients. Let us be your guide in your home-buying journey so that you can move forward with more confidence. Contact us today at 262.629.4747 or send an email to ContactUs(at)EmmerRealEstate(dotted)com. Make sure to browse our site for other blogs related to mortgage prequalification and pre-approvals here.