Most people are unfamiliar with the mortgage process, and that is why they remain confused, to begin with. The terms and conditions seem perplexing, and that is why the agency’s motto should be working to help the customers out and navigate their journey to fulfill the dream of purchasing their new home.
One of the most frequently asked questions is the difference between preapproval versus prequalification. They may sound similar, but truth be told, they are pretty distinct in their own way, which is dependent on your lender too. Let us clear the air a bit to understand the main differences.
Preapproval vs prequalification of mortgage – The Difference
Few lenders often use them interchangeably, but the two terms differ in meaning. Every lender handles the approval process differently.
Prequalification is a somewhat off the record document that indicates about the initial approval for the process. It will notify your successful application but will not accurately represent how much you will be approved for. Prequalification approval does not include the credit report; therefore, without it, lenders can only estimate what amount you will be approved for.
Preapproval – an official step towards the whole process where lenders are able to evaluate by looking at your credit score, income and assets which will help them determine the loan amount along with the interest rate you will receive.
Utilize and Negotiate
Both stages, be it preapproval or prequalification, help in assessing your mortgage and the budget for your future dream home. Additionally, the information present in both documents are apt for negotiating or placing an offer.
Sellers are prone to make concessions to buyers who are well-qualified and with minimal issues. If there is a need for repair or certain level improvements in your home purchase deal, a preapproval or qualification will help you get what you aim for.
When to Apply?
Timing is of prime importance at the time of buying a home. More so when we talk about going for preapproval or even prequalification. It is best that you apply for a mortgage preapproval at a time when you are actively busy in the buying process. However, not so further in that you have the risk of preapproval expiring.
A safe and quick method for prequalification is applying online. Do not worry; we at Red Door Funding can help you get through the taxing process with ease.
When Do They Expire
Mostly, preapproval time for a mortgage lasts for about 60 to 90 days. During this time, it is possible for your financial standing to change. Most lenders are not up for the challenge of taking the risk with a borrower coming after the 90-day time mark. In case your preapproval expires, get your preapproval again.
Final Take Out
Getting a prequalification is a smart method to attain an estimate of what cost for a home you can go for, while a preapproval application will help verify your financial information submitted for a more accurate amount. In a nutshell, each has a difference, but some similarities are also present.
Every document or approval plays a pivotal role in the whole home-buying process. It is crucial to understand the differences and how both documents work to get the best for yourself. Reach out to our team at Red Door Funding whenever you are ready to get on with either of these steps for your dream home call at 832 539 1099 for more information.