Five key differences between prequalified and preapproved for a mortgage, Why does it Matter
1. Depth of Evaluation:
o Prequalification is a preliminary step based on self-reported financial information like income, debts, and assets. It’s more of an estimate.
o Preapproval involves a thorough review of your financial documents (tax returns, credit report, bank statements) by a lender and is a more formal, reliable assessment.
2. Accuracy:
o Prequalification provides a rough estimate of the loan amount you might qualify for, but it is not guaranteed.
o Preapproval gives a more accurate loan amount based on verified information, making it more reliable in the home-buying process.
3. Credit Check:
o Prequalification might not involve a hard credit inquiry. Often, lenders only perform a soft pull or none at all.
o Preapproval typically requires a hard credit inquiry, which can affect your credit score slightly but gives the lender a complete credit profile.
4. Usefulness in Buying Process:
o Prequalification is useful for an initial understanding of your home-buying power but is less credible in competitive markets.
o Preapproval holds more weight with sellers and real estate agents. It shows that you are a serious buyer, ready to make an offer with financing secured.
5. Time Commitment:
o Prequalification is a faster and simpler process, often done online or over the phone, sometimes in just a few minutes.
o Preapproval takes longer, typically a few days, because it requires document submission and lender verification. A preapproval is always better!! A seller wants to know that they have a secured buyer for their home..