Whether you are a first-time home buyer or a seasoned homeowner, when it comes time to make a purchase, your Realtor may suggest that you get “pre-qualified” or “pre-approved” before you shop. What does that even mean?! They sound like they are very similar and yet, there is a big difference.
A mortgage pre-qualification is an initial assessment by your lender to determine your ability to qualify for a mortgage. Typically, this is done with information that is provided, but not verified by documentation. The lender will also use a computer-generated underwriting system such as Fannie Mae’s Desktop Underwriter, to assess.
A mortgage pre-approval is a more in-depth assessment by your lender. Generally, documentation is provided by the borrower for all aspects of their financial situation (assets, income and credit) and an actual underwriter will review and make a determination as to the borrower’s ability to obtain financing subject to finding a property.
When you start thinking about purchasing a home, I would love to meet with you and go over your individual situation to determine what is best for you!