"Pre qualification" and "Pre approval" are two terms you're gonna encounter when you are looking to get a home mortgage. While these two terms seem self explanatory, they need to be understood better so you get a better idea when it comes to mortgage financing. Here is a brief explanation of the difference between the two terms:
"Pre qualification" - The first look to your mortgage options
The pre qualification process is an easy step to get your mortgage financing started. During this step, you will meet with a lender or lending company and that lender will assess your financial history and current income, alongside your current debts. Using all the info they gather, they will calculate the amount of mortgage financing you qualify for.
Your mortgage advisor will answer all your questions with regards to the pre qualification process including interest rates that you qualify for and how much down payment you should prepare yourself to pay for.
"Pre approval" - The assessment of mortgage commitment
After you get pre qualified for a mortgage, you will be ready to look for your new home, and you will be up for the pre approval process. At this time, your lender will take a deeper check on your financial situation. Your credit report will be pulled out so they can assess the risks of lending you money.
You will complete an application as this will allow the lending company to get a conditional approval as to what the specific mortgage range or amount is.
Last step: Finding the perfect property
Once you get pre approved and receive a conditional commitment from your lending company, you are ready to look for that perfect house. Not only you are already very well informed of the price range that you can afford, you will also be taken far more seriously by sellers as you have already been pre approved, which means that you are a serious buyer who is ready to pick a house anytime.
