Understanding common terminology is essential to the home buying process โ especially when it comes to obtaining a mortgage. One of the most common misconceptions we see is the misuse of the terms pre-approved & pre-qualified.
Pre-Qualification
When you are ๐ฝ๐ฟ๐ฒ-๐พ๐๐ฎ๐น๐ถ๐ณ๐ถ๐ฒ๐ฑ your lender will only look at your general financial picture, asking basic questions to make a tentative assessment as to how much they could be willing to lend you. A pre-qualification is not a guaranteed loan, but is a good step to take early on, long before you start shopping.
Once you start to get serious, that is when the pre-approval process comes in.
Pre-Approval
To be ๐ฝ๐ฟ๐ฒ-๐ฎ๐ฝ๐ฝ๐ฟ๐ผ๐๐ฒ๐ฑ means that your lender has taken things one-step further than the original qualification process. The pre-approval process generally takes more time to complete, involves a full mortgage application and a wider range of specific documentation that will be further verified by the lender. You will need to provide detailed information about your financial situation. Expect to bring the following with you when you meet with your lender for pre-approval;
- Current address
- Previous address (if current address is less than 3 years)
- Current employment information (e.g. employer’s address, telephone number)
- Previous employment information (if current employment is less than 3 years)
- Sources of verifiable income (e.g. pay stub, employment letter, bank statement confirming direct deposit, investment statement)
- If self-employed, the last 2 years Notice of Assessments from your Income Tax return
- Value of properties, automobiles, investments, and savings
- Most recent statements for mortgages, loans and lines of credit
- Most recent credit card statements
- Estimated value of your home (if applicable)
- Housing expenses (e.g. property tax, annual condo fee, heating costs)
- Financial information for your co-borrower (if applicable)
If you are pre-approved your lender is making a commitment to loan you money (subject to some conditions such as property valuation) & some lenders will also offer you a rate hold for a specific interest rate (fixed rates only).
Being pre-approved alsoโฆ.
- Makes you a more attractive buyer
- Gives you more negotiating power
- Can make for a faster home buying process
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Have questions about the approval process? Our team can help connect you with one of our trusted mortgage professional โ contact us today!
