When you begin the process of buying a home, there are many things to consider. Not only do you have to find a home that fits both your budget and needs, but you also have to obtain financing. This means that you have to begin the process of getting a mortgage loan. Many home buyers will start by getting pre-approved for a mortgage. However, before you get mortgage pre-approval, it is important to understand what this term actually means and how it is different from mortgage pre-qualification.
Both of these terms are often used interchangeably, but they do not entail the same thing. This means that mortgage per-approval is not identical to mortgage pre-qualification. To gain a better understanding of the differences between the two, you need to learn what each term means.
What is Mortgage Pre Qualification?
When you become pre-qualified for a mortgage loan, this simply means that you are given an estimate of how much you potentially could be loaned by a lender. Pre-qualification is directly linked to the amount of home that you can afford. It is important to get pre-qualified for a mortgage before you begin the house hunting process, so that you have a rough estimate of the price range of houses you should be looking at. The estimate that you are given at the time of pre-qualification is just a ballpark figure and is not exact. Some home buyers are even given a pre-qualification estimate that they can’t actually afford, which means that you need to be cautious.
What is Mortgage Pre-Approval?
Mortgage pre-approval is different from mortgage pre-qualification in the way that pre-approval involves being given a tentative commitment from a lender for a mortgage loan. In order to become pre-approved for a mortgage you do have to provide a lender with various documentation of your income, assets and debt. If you receive pre-approval for a mortgage, you will receive notification and can begin searching for a home. It is important to get pre-approved for a mortgage before you begin house hunting. However, it is essential that you remember mortgage pre-approval is not the same thing as being approved for the loan in full. You still have to go through a loan approval process once you find a home after being pre-approved for a mortgage. There have been instances where pre-approval did not result in actual loan approval.