MARSHFIELD, WI (OnFocus) – Realtors often suggest that buyers become “pre-approved” or “pre-qualified” before beginning the home search process. While these mortgage terms sound similar, they have very different meanings. Fairway Mortgage in Marshfield works with buyers through all stages of the home buying process and can explain these important terms.
“For a home buyer, a pre-approval letter is more beneficial in the home buying process than a pre-qualification letter because it indicates a more serious offer to the seller,” explained Josh Kilty, Fairway Mortgage.
A mortgage prequalification is an initial assessment by a lender of a borrower’s ability to qualify for a mortgage. When buyers are prequalified, the credit report may or may not be retrieved, and information on employment, income, assets, and liabilities is provided to the lender by the borrower.
“However, none of this information is verified by the lender, which makes it less accurate than a pre-approval. In the case of a prequalification, the lender relies on the buyer to provide an accurate estimate for these items, ”Kilty said.
In contrast, a pre-approval is determined after further analysis by the lender of the borrower’s income, expenses, assets, liabilities, and credit rating. Usually, documentation is provided by the borrower for each of the above so that the lender can verify the information that was provided verbally at the prequalification stage.
A pre-approval is not a loan commitment, as only an insurer can provide it. However, a pre-approval letter lets the seller know that the information provided to the lender has been verified and it looks like the borrower will be approved for the loan.
“Once you are serious about buying a home, you should consider getting pre-approved for a mortgage so you know how much you can afford to buy a home,” Kilty said. “It’s important to remember that neither a pre-approval letter nor a pre-qualification letter guarantees that you will be approved for your mortgage. However, by asking for pre-approval, you are going one step further.
Kilty works with potential buyers to make their dreams come true.
“When you’re ready to buy a home, I’d like to meet with you to review your finances and your credit report and start your pre-approval,” Kilty said.
To learn more, visit www.FairwayJoshK.com
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