Is it better to be preapproved or prequalified when you are looking to buy a new home?
Before you can buy a home, you need to know what you can afford. This is why it’s important that you meet with a lender and give them your financial information. From there, they will determine what they are willing to lend you. The lender has two different options when it comes to your financing quote: prequalification and preapproval. Here’s what you need to know about these two options.
Prequalified
Getting prequalified is the initial step in the mortgage process. To get prequalified, you provide your lender with a general understanding of your finances. After looking over this information, your lender can estimate the amount of loan you qualify for. The pre-qualification process is fairly simple and can usually be done over the phone or online. Additionally, this process is free and does not include a detailed look at your credit report. It is important to remember that being prequalified for a loan does not mean that you are guaranteed. This is simply an estimate of how much you might be approved for.
Preapproved
Getting preapproved is a more involved process. During this process, you will fill out a mortgage application and undergo a more extensive financial background check. After checking your credit rating, your lender should be able to tell you the exact mortgage amount you are approved for. At this point, you will also learn what your interest rate will look like. Essentially, preapproval is more definite and binding than prequalification.
Which is better?
When it comes to house-hunting, being preapproved is much more powerful and can ensure that your bid is taken seriously. This is because being preapproved tells a seller that you are a serious prospect who can actually afford a good mortgage. This peace of mind will make sellers more likely to trust you than other buyers who are only prequalified.
This is what you need to know about the difference between being prequalified and preapproved when house hunting. Are you looking to buy a home in Hermosa Beach? If so, contact the experts at Brighton Escrow to get the top-tier escrow service you deserve. Serving the Hermosa Beach area, we are ready to make home buying and selling a breeze.
