Mortgage Basics: Information for First Time Home Buyers

What is the difference between being pre-qualified and pre-approved?

Pre-qualifying is the process through which a loan officer determines the dollar amount that a buyer can qualify for based on their income, debts, and down payment. Pre-approval is when your loan application and income and asset documents are underwritten and approved by a specific bank or lender. Receiving an actual pre-approval is recommended before making an offer on a home for two reasons. The first is that a seller will feel more confidant receiving an offer from someone who has been pre-approved than from someone who hasn't. The second reason for pre-approval is that it reduces the amount of stress involved in the real estate purchase process. There's nothing worse than finding your dream home and worrying about being approved for the loan.