The difference between pre approved and pre qualified

If you’re by chance have ever taken a home loan from a particular bank or looking to avail one in the near future, you have probably come across the terms pre-approval and pre-qualification. Most people think that this is one and the same thing, with the only difference being the choice of terminology. While this is partly the right answer as pre-qualification and pre-approval share a lot of similarities, there are some differences. Looking ahead to the point where you wish to avail a home loan to purchase land or a house, having a pre-qualification and pre-approval will certainly give you the upper hand. Getting to the point, what is the difference between the two, or are they the same thing?

The Similarities Between Pre-Qualification and Pre-Approval

To help you understand the difference between the two, let’s make it simpler for you to understand and first discuss the similarities between pre-qualification and pre-approval. The similarities are listed below:

• It’s important to realistically know what and which house you can purchase. Going through the process of pre-qualification and pre-approval will help you determine your budget - based on your financial history and financial capabilities - and help you decide on a loan amount that will in most cases be approved - as it suits your financial ability.
• Having either a pre-qualification or a pre-approval letter will give you the upper hand when it comes to the bank approving your loan.
• Considering the real estate market is one that is constantly competitive, having a pre-qualification and a pre-approval letter will certainly give you a better chance of your loan being approved.

RELEVANT PAGES FOR YOU

• Different Types of Bank Loans in India
• Loan Against Agricultural Land
• Guide to Buy Flats
• Home Loan Procedure

• Top Housing Finance Companies
• Agricultural Loans in India
• Home Loan Processing Fee
• Home Loan Provisional Certificate

• Documents Required For Home Loan
• Documents for Buying Resale Flat
• Secured Vs Unsecured Loan
• Home Loan Approval Time

What is the Difference Between Pre-Qualification and a Pre-Approval Loan?

There is not much difference between the two to be honest.

• A pre-qualification is the first step of a pre-approval.
• The pre-qualification in most cases is a verbal discussion between the wishful loan buyer and the bank executive.
• The bank executive will request the customer to verbally give his financial details such as credit history, current financial status and income of the last few years, his/her annual income, the company he/she works for, debt-to-income ratio and so on.
• On hearing the answers given by the customer, the bank executive will make a verification and offer you a loan which suits you best - one which is within your budget.

In the case of a pre-approval, the bank will make an in-depth or a comprehensive verification of the customer’s credit score, income over the last few years, annual income, monthly net income, debt-to-income ratio and so on. This process is not done verbally and isn’t based on the details verbally provided by the customer, here the bank executive will do a thorough background check of the customer’s details before giving an approval.

What You Should Not Do After Getting Pre-Approved or Pre-Qualified Loan

Getting a preapproval does not guarantee you getting a loan approval, and before an approval comes through, this is what you shouldn’t do after a pre-approval or pre-qualification.

• Continue to pay your credit bills on time ensuring that your credit score is optimum.
• Refrain from making expensive purchases during this period - like buying a car or expensive furniture.
• Do not shift jobs
• Make sure no new debts are incurred

To sum it all up, the bank is not obligated to give you a loan approval even after you get a pre-approval or a pre-qualification letter. Yes, you certainly have the upper hand, but the bank - based on numerous factors, some of which are already mentioned above - has every right to not approve your loan application.

Resources

Calculator

• Home Loan EMI Calculator
• Home Loan Eligibility Calculator
• Home Loan Balance Transfer Calculator
• Home Loan Prepayment Calculator
• Home Loan Repayment Calculator
• Land Conversion Calculator
• Home Loan Affordability Calculator
• PMAY Subsidy Calculator

As you prepare to apply for a mortgage, you’ll come across terms like “prequalification” and “preapproval.” It’s essential to understand what these terms mean – they’ll guide your home search and help you focus on homes you can afford. When the time comes, they can also help you decide how much to offer and show the seller that you’re a serious buyer.

At the most basic level, prequalification and preapproval are types of mortgage approvals, and they refer to the steps a lender takes to verify that a client can afford a mortgage. In this article, we’ll review some common ways lenders use prequalification and preapproval. But first, a couple points to remember:

• Every lender handles mortgage approvals differently. The steps and words involved change from lender to lender. Many lenders use prequalification and preapproval interchangeably although they’ve meant fundamentally different things traditionally.

• No matter what type of mortgage approval you get, it's not a guarantee that you’ll close the loan. Prequalification or preapproval is a way for a lender to help you and a seller estimate what you can afford. After you find a house and make an offer, the home will still need to be appraised by a third party and inspected for potential repairs before you can close the loan and buy the home.

We’ll also explain how Rocket Mortgage® handles approvals, so you can know what to expect when you apply for a mortgage.

Explore the meaning of home with our podcast, Home. Made.

New episodes every other week. Follow and listen for free on your favorite podcast player.

What’s A Mortgage Prequalification?

A prequalification generally means that a mortgage lender collects some basic financial information from you to estimate how much house you can afford. Getting confirmation from a lender that you prequalify for a home loan allows you to have a general idea of how much you’ll be approved for when it comes time for closing.

It’s common for a prequalification to rely on self-reported information, instead of verifying by pulling your credit report or reviewing financial documents. This means being prequalified for a mortgage typically leaves you with a ballpark estimate. It also means it’s less reliable than a preapproval, which usually involves your lender checking your credit score and reviewing bank statements and other documents.

As you begin searching for a home, real estate agents and sellers want to see you’ve been working with a mortgage lender so they know you can afford to buy a home. After you’ve been prequalified, you’ll usually receive a “prequalification letter” you can show to an agent or seller as proof you’re working with a lender. This is a good first step, but it typically won’t carry as much weight as a preapproval because a lender hasn’t yet verified your information. Going beyond a prequalification and getting preapproved by a loan officer is a critical step to showing you’re serious about buying a home.

Prequalified Vs. Preapproved For Your Mortgage: What’s The Difference?

Both prequalification and preapproval provide borrowers with an estimation of how much home they can afford. However, a mortgage preapproval is a more official step that requires the lender to verify your financial information and credit history. Documents required for a preapproval may include pay stubs, tax returns and even your Social Security card.

This means a preapproval is a stronger sign of what you can afford and adds more credibility to your offer than a prequalification. This will also allow you to show sellers a preapproval letter to demonstrate that your financial information has been verified and you can afford a mortgage. However, check with your lender to be sure.

Why Is Getting Approved For A Mortgage Important?

Getting approval for your mortgage means that a lender has reviewed your financial situation and confirmed your ability to take on mortgage payments.

When you get a mortgage approval, your lender estimates how much you can afford to borrow, what your interest rate could be and how much your mortgage payments could be. You and your real estate agent can use this information to focus on homes you can afford.

A mortgage approval also proves to sellers that you can afford the home they’re selling. Without first securing approval from a lender, the seller might not trust your offer is genuine. Your offer might not be accepted – and even if it is, offering to buy a home without lender approval can slow down your mortgage loan application.

Getting Approved With Rocket Mortgage: What To Expect

Rocket Mortgage offers a few levels of approval designed to give you a clearer picture of what you can afford:

Prequalified Approval

With a Prequalified Approval, we’ll pull your credit and ask you some questions about your income and assets. Then, we’ll estimate what you can afford. By checking your credit score, our Prequalified Approval can be more accurate than a standard prequalification that doesn’t involve this step.

If you’re eligible for a mortgage, we’ll issue you a Prequalified Approval Letter.

Verified Approval

After you’ve been Prequalified Approved, you can level up to a Verified Approval. 1You’ll speak to a Home Loan Expert and provide some documentation so we can verify your income and assets.

Because we’re verifying your income and assets along with your credit history, a Verified Approval is a more accurate estimate of what you can afford. It also carries more weight with a real estate agent and the seller, because they’ll know we verified that you can afford the home you wish to buy.

Once you get Verified Approval, we’ll give you a Verified Approval Letter. You can show this to your real estate agent and the sellers as proof that you can obtain a large enough mortgage to purchase the home.

Remember, both Prequalified Approval and Verified Approval℠ are estimates to help guide your home search. After you make an offer on a house, your full mortgage approval will depend on the home being appraised by a third party and passing any required inspections.

The Bottom Line

A mortgage prequalification is a good way to get an estimate of how much home you can afford, and a preapproval takes it one step further by verifying the financial information you submit to get a more accurate amount. Getting approved early in your home search is a great way to know what you can afford, so you can narrow in on your dream house and stand out to sellers as a preapproved buyer. To get started, apply online with Rocket Mortgage.

1Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, debt, property, insurance, appraisal and a satisfactory title report/search. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Rocket Mortgage’s® control, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close, you will receive $1,000. This offer does not apply to new purchase loans submitted to Rocket Mortgage through a mortgage broker. Additional conditions or exclusions may apply.

Which is better pre

Does pre

What does it mean when you get pre

Is pre