What is the difference between a loan prequalification and loan preapproval?
Article by Joshua Rodriguez
If you’re looking to buy a home, having your mortgage application rejected can certainly cause you some emotional distress, but it can also make you lose a significant amount of money. You may have already spent hundreds of dollars or more in inspecting the property and paying for application fees and other closing costs.
Not to mention, you have invested many hours of your time and emotion trying to settle on the right home for you at this time. Clearly, it is best to have some idea of whether you would qualify for a mortgage before you go through the entire process and spend some of your hard earned money. What is the best way to avoid these difficulties?
First of all, it’s important to understand the difference between loan prequalification and preapproval. Prequalification is not an official approval. It is an informal term which means the lender has provided an opinion based on the information you have given him about your income, credit history, etc. Nothing is set in stone, since the lender has not gone through the process of verifying your information.
When we talk about preapproval, we’re talking about a more formal and extensive process. The lender may or may not charge you for this more rigorous process, but it is not unusual to have to pay something sends more work is required on the lender’s side of things.
In the preapproval process, your employment, your current income and debt load, and other personal information is evaluated before you are approved for a particular mortgage amount. If you qualify, you can receive a preapproval letter from the lender, and this can be helpful when approaching the seller in order to prove that you are a serious buyer. If the seller receives more than one offer, having this type of preapproval can be very helpful in order to give you an edge over others who may not have very good credit.
One thing to keep in mind is that this preapproval process can be a waste of time (and your money if the lender charges you a fee) if you are not intending to purchase a home in the immediate future.
About the Author
Joshua is an avid researcher and enjoys writing about many topics, including health and fitness, real estate, business, and investing. Please visit his site for more information on fire proof safes and stack on safes today.
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