As a first time homebuyer, getting a mortgage might seem a bit daunting. As you navigate the approval process, don’t be confused, a pre-approval is much different than being pre-qualified.
Here’s the skinny:
This term refers to a general review of your finances and a recommendation of what you can afford. In a conversation with a banker, you would review your income, debts, desires etc. and s/he would be able to identify an approximate mortgage amount. Pre-qualification can be done quickly over the phone or internet and does NOT include a review of your credit report. Just because you are pre-qualified for a mortgage does not mean you’ll actually be granted a mortgage.
Getting pre-approved is a more in-depth process, requiring a review of your credit history and a verification of your income and debts. After reviewing you finances your loan would be submitted to underwriting – and ultimately you’d be provided with a pre-approval letter that you can use when making an offer on a home. Pre-approvals are normally good for 120 days so it is important to make sure you have this documentation when presenting offers to home sellers.
Ultimately, there is no harm in getting pre-qualified but to have a good chance at getting a home and a mortgage, you need to be pre-approved.