It’s crucial to know what you can afford before viewing homes online or with a realtor. Most Realtors will encourage you to get pre-approved for a mortgage to avoid looking at houses you can’t afford.
Getting a pre-approved mortgage will help you when placing an offer and allow you to act quickly once you find the perfect home.
What is a pre-approval?
A lender reviews your income, the source of your down payment, your assets and liabilities, and inspects your credit report to determine your credit worthiness. The lender will determine the maximum amount you qualify for, and supply you a letter of pre-approval to loan you money.
What is a pre-qualification?
In a pre-qualification, a mortgage specialist will discuss what you may or may not be able to afford based on your current income and savings potential. In this instance, your financial information does not need to be verified and there is no credit application.
Pre-approval has become a catch-all term for both pre-qualifications. Be aware if you have been pre-qualified or pre-approved. Pre-approved is based on verified financial information such as a credit check, whereas pre-qualified is based on your current income and savings potential.