*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
A common Myth in the mortgage world is borrowers thinking that pre approvals and pre qualification are the same thing. Although they are extremely similar in many ways, they also differ in important ways.
Both pre-qualification and pre-approvals are important when it comes to finding a house to purchase. They give the borrower leverage and purchase power when it comes to negotiations, because sellers and their agents know that the borrower is already approved to purchase a home.
The main difference between the two though comes in the thoroughness of the qualification.
A pre-qualification letter is an initial evaluation of a borrower's ability to purchase a home. This includes a review of a borrowers stated income, stated credit score, and brief review of a borrower's DTI ratio's. Pre-qualification gives an estimate of a possible loan amount based off of the information a borrower gives his/her loan officer. Although a pre-qualification does hold some weight, it doesn't hold a ton of weight when it comes to negotiation leverage.
A pre-approval is a more thorough process which includes a borrower completing a loan application and the loan officer doing a more in-depth examination of the file. They'll review the completed mortgage application to make sure that a borrower qualifies for the amount they're asking for, they'll pull credit, look over paystubs and income, DTI ratio's, and determine the borrower's ability to repay the loan. The pre-approval letter will include details of the borrower's file and give the seller and their agent a better idea of where the borrower sits in the home buying process. The pre-approval holds the most amount of weight when it comes to negotiation leverage and gives the seller a clear idea of what type of buyer they're dealing with.
No matter where you're at in the search for a new home, contact me! I'd love to get you a pre-qualification letter and a pre-approval letter to give you a better chance at getting into your dream home.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Brayden Ramsay NMLS #1997195
Momentum Loans NMLS #1606597
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