916.385.9716 Sonia.Krietz@SNMC.com

When buying a home, financing is an essential part of the equation and securing financing beforehand can serve as a powerful bargaining chip when it comes time to negotiate on that real estate sale.

But many soon-to-be homeowners simply don’t know the difference between mortgage pre-approval and mortgage pre-qualification so today, we’ll explore how these two processes differ and which you should opt to pursue before beginning your search for the perfect home.

What is Mortgage Pre-Qualification?

Mortgage pre-qualification involves a general, cursory look at your credit and income level, and according to this information — which is typically offered up by the consumer or pulled from consumer databases — you may pass the preliminary qualifications for a home loan.

The problem with pre-qualification is two-fold. Firstly, it’s based on cursory, non-confirmed information, which could be incorrect or outdated. As a result, you may not actually be approved for a home loan in the amount that you’re seeking.  Secondly, pre-qualifications offer no guarantee or promise that you will actually be approved for a mortgage (and if so, there’s no telling how much you’ll be approved to borrow.)

So in short, a pre-qualification is a lender’s way of saying “you may be eligible for a mortgage.”

This lack of certainty makes a pre-qualification virtually useless for an aspiring homeowner. In fact, pre-qualification could result in disappointment if you fall in love with a home but cannot get financed for a sufficient sum that will allow you to buy the property.

What is Mortgage Pre-Approval?

Mortgage pre-approval is recommended for anyone who’s seeking to buy a home. Pre-approval entails a more comprehensive look at your finances, your credit score, your debt burden and other factors that are taken into consideration when determining if you’re eligible to borrow.

Based on this review, the client will be pre-approved to borrow up to a specific amount, which provides the home buyer with a specific budget that they can keep in mind while viewing properties and seeking a new home.

A mortgage pre-approval is more or less a guarantee that you’ll be able to get a mortgage from that particular lender (providing there is no significant change in your financial situation or credit score between the time you’re pre-approved and the time when you actually take out a home loan.)

Pre-approvals are generally only valid for a finite period of time, so it’s important to get a pre-approval only when you’re ready to actually buy a home. The more time that elapses between the time you receive the pre-approval and the time when you seek to finalize the paperwork, the greater the chance that there may be a change in circumstances that could render the pre-approval useless.

The main benefit of a pre-approval — aside from knowing that you can almost certainly get financed for a specific amount — is that you’ll have a greater bargaining power if you need to enter into negotiations for the home; this is especially true if you come up against another potential buyer who has not secured financing. Virtually all sellers will opt to work with the buyer who has been pre-approved versus the buyer who has only been pre-qualified.

If you’re ready to get a home loan, wish to refinance or require help getting on the path to home ownership, contact Sonia Krietz, with Security National Mortgage Company.

You may wish to complete the pre-application form and Sonia will be in touch to help you proceed through the process. If you have any questions or concerns, you can also contact Sonia Krietz by phone at 916.385.9716.

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