Dear Sherry: What’s the difference between getting pre-approved and pre-qualified for a mortgage? I hear these terms used interchangeably – are they the same thing?
Though a prequalification and a pre-approval may seem to be the same thing, the differences are quite significant. Both require specific information from homebuyers. But that’s where the similarity begins and ends.
In both cases, home buyers provide the following information:
- Sales Price
- Down Payment (to determine the loan amount)
- Monthly Income
- Monthly Debts
- Area in which they’d like to purchase (to estimate taxes and homeowners insurance)
- Type of loan they’d prefer (30-Year Fixed, 5-Year ARM, etc.)
With pre-qualifications, the loan officer uses the information provided to make an educated guess about the loan amounts for which the home buyer will qualify. There is no real loan commitment.
With pre-approvals, a lender asks for the same information. However, before a pre-approval is given, the lender scores the loan, reviews credit history and makes an underwriting decision. Once the home buyer is pre-approved, they will get the loan, provided that they have given the lender accurate information that they can back up with the required documentation.
If you don’t want to gamble with your time and expense, or your condo buying dreams, I would highly encourage you to settle for nothing less than a pre-approval.
Happy condo hunting!
Sherry Graziano is a Mortgage Advisor for Coldwell Banker Home Loans and has been assisting buyers for over 5 years with condo purchases. She currently specializes in condo mortgages. Sherry is also a licensed Florida real estate agent.