To buy a house, you will likely need to get a loan from a bank to make this purchase. If you have never applied for a loan before during the home-buying process, there are a couple of key terms you should understand, and these are prequalification and preapproval. These terms do not have the same meaning, so here are the key differences you should understand about prequalification versus preapproval when trying to get a home loan.
Prequalification
The first term, prequalification, refers to an initial response from a bank telling you that you appear to be qualified for a loan. It is not a guarantee from the bank that they will give you a loan, nor is it an offer for a loan. It is simply the statement a lender gives you that tells you that your finances and credit seem to be in line with the conditions and requirements of a mortgage loan.
Getting prequalified is not a hard step to go through, and it basically requires no work except a phone call. When you call, you can talk to a loan officer and let him or her know that you would like to find out if you are currently prequalified for a loan. The lender will ask you questions about your finances and current situation and will respond with an answer during this conversation. There is no need for you to submit documents to the lender at this time, nor will the lender research your credit or financial state.
Preapproval
The process of getting preapproved for a loan requires a little more work, and it takes the loan approval process one step closer to getting an actual loan to buy a house. During this process, you must give the lender copies of financial documents, and the lender will verify the accuracy of these. The lender will also obtain your credit report file to see what your score is. If you meet the conditions for a loan based on your verified documents, the lender will preapprove you. While this too does not mean that you will definitely get the loan, it does mean that you meet all the conditions and requirements needed to get a loan.
If you are ready to call a real estate agent to begin shopping for a house, you should make sure you are preapproved and not just prequalified. If you are preapproved, you are likely ready to make a house purchase, and this is important before you begin viewing homes. To get prequalified or preapproved, contact a home mortgage company today.
