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Wondering whether you should get prequalified or preapproved? You may see offers everywhere for free prequalification for a mortgage. What you may not know is that prequalification really means nothing when it comes to getting a home loan. What you really need to get is a preapproval.
Should you get a prequalification or preapproval? With a mortgage prequalification, the lender simply asks you for some basic information like your income, credit score, and down payment. Then they crunch some numbers with an algorithm to spit out the likelihood of you being able to get a mortgage, and an idea of how much you can get.
The answer assumes you are exactly right with all of the numbers you provide, and doesn’t take into account things like your actual debt-to-income ratio or if your credit history has some troubling information in it. Best case scenario, a prequal is an estimate of how much you might be able to borrow.
This is in contrast to preapproval, which involves the lender verifying all the buyer’s information and documentation and pulling a hard credit report to determine exactly how much the borrower can afford. It also establishes the down payment and available loan programs.
Being prequalified vs. preapproved is a big difference. The majority of sellers will not accept a simple prequalification letter. Especially in today’s competitive housing market, a seller will want a full preapproval letter that specifies whether the buyer’s credit check, income, and assets have all been verified and meet the lender’s requirements.
Even if you can’t fill out everything at once, submit the mortgage application. A loan officer will contact you for further clarification. To make progress, you’ll want to provide the absolute best contact information with your application. The mortgage process requires constant two-way communication. You’ll need to provide specific financial information and documentation like bank statements and tax returns.
Being prequalified vs. preapproved is a big difference. The majority of sellers will not accept a simple prequalification letter. Sellers want a full preapproval letter that specifies that your credit check, income, and assets have all been verified and meet your lender’s requirements.
Submit the mortgage application with as much information as possible. A loan officer will contact you if they need more documentation. You’ll need to provide specific financial information and documents like bank statements and tax returns.
Most preapprovals take no more than three business days, unless your specific situation is very complicated. Your lender will send you a pre-approval letter, which you can then use to prove to real estate sellers that you are a serious buyer.
It’s best to get a letter that states a preapproved loan amount at the top of your target price range. With the preapproval letter from your lender in hand you can start your home search and make an offer as soon as you find a house.
Now is a great time for looking into getting preapproved to buy a home. You can use our free Instant Rate Quote tool and Rate Tracker to find out how much you could be saving every month or over the life of your loan.
At Sammamish Mortgage, all of our Loan Officers (LOs) are salaried. This means they always put the client first, making sure you get the best loan for your budget, not the biggest one to earn a commission.
We offer some of the most competitive rates in the nation, and it’s our goal to give you a hassle-free home loan experience. We’re proud to say we close most of our loans in 30 days or less. We offer a wide variety of home loans, including FHA and VA loans, and do preapprovals for free so you can start looking for a home as soon as possible.
For more information on your home mortgage options, feel free to contact us today. We currently lend in all of Washington, Oregon, Idaho and Colorado and have been offering mortgage programs to borrowers since 1992. Our friendly team of experienced mortgage professionals will advise you on which home loan program best meets your needs.
Are you ready to apply for your home loan, get preapproved, and lock in a low interest rate? If so, Sammamish Mortgage can help you get started. Get in touch with us today!