Loan Pre-Qualification vs. Pre-Approval
When it comes to buying a home, the terminology used in real estate transactions can get confusing! One area that can be particularly confusing is the loan application process. Did you know that pre-qualification and pre-approval for a loan are two different things? Many homebuyers think the terms can be used interchangeably, but they are very different. Hudler Homes is breaking down the difference between a loan pre-qualification and a loan pre-approval on our blog. Keep reading to learn more!
What is Pre-Qualification?
Loan pre-qualification is the very first step you take in the homebuying process. When you are ready to purchase a home, you need to first check if you prequalify for a home loan. This is essentially an estimate provided by a lender that tells you the amount of a loan you may be able to borrow. The lender determines this information based on your current financial situation and a credit check. The pre-qualification step is also a great opportunity to learn about the different kinds of mortgage options that may be available to you.
What is Pre-Approval?
Loan pre-approval is completely separate from a loan pre-qualification. A loan pre-approval is confirmation that you qualify for a particular amount to purchase a property. To complete this step, you will need to fill out a mortgage application and the lender will run a credit check. Once you are “pre-approved,” your potential lender will provide a pre-approval letter that confirms they are willing to lend you a set amount of money to purchase a property. Pre-approval letters are typically valid for 90 days. Pre-approval is a very important step because it shows sellers that you are serious about purchasing a home and have done the necessary work to start securing a mortgage loan.
Do I Need to Do Both?
Great question! While pre-qualification and pre-approval are not required to purchase a home, they are both beneficial steps to the real estate transaction process. Getting pre-qualified can give a buyer helpful insight into how much home they can afford. Providing a pre-approval letter to a seller shows you are a serious buyer, which might as well be a requirement in today’s competitive market. Most sellers will not review an offer without a pre-approval letter.
How Long Does Each Step Take?
A very common question is how long each step of this process will take. The short answer is that both of these steps can take different amounts of time. Loan pre-qualification can usually be completed online through a lending organization, though it would be best to talk with a local lender to get started. Many can deliver a response in an hour or less. The loan pre-approval process can take a bit longer because you will be required to submit documentation and an application. Typically, a loan pre-approval letter takes about 10 business days or less to receive. If you’re working with your trusted local lender, that time should be even shorter.
Work with Hudler Homes
Are you thinking of applying for a loan in 2022? Hudler Homes wants to help you! If you are looking for a real estate agent who knows the Baltimore area and can help you explore your options, I’d love to meet with you. Reach out to me through my website or give me a call at (302) 545-8569, and follow my blog for more home buying tips!