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The difference between pre-qualified and pre-approved

| Apr 29, 2019 | Residential Real Estate Law

When shopping for a home in Connecticut, some buyers may hear that they need to be pre-qualified or pre-approved and think they are the same thing. However, according to Realtor.com, this is not the case at all. Being pre-qualified is actually an initial step before seeking pre-approval for a mortgage loan. Completing both processes will leave you in a better position to buy your next home.

To get pre-qualified, you approach a mortgage lender with certain financial information that generally explains your income, your assets, your credit and your debt. However, the information you provide is pretty basic and does not need to include documents that back up your claims. After you have provided this information, the lender will give you an estimate of the loan you can possibly afford.

However, going through pre-qualification is no guarantee that you will actually receive a loan. Some buyers may find a home they want to purchase, but they are only pre-qualified, not pre-approved. The problem is that pre-qualification does not provide the in-depth analysis of your finances that a pre-approval process includes. For this reason, some sellers will not accept buyers who are only pre-qualified.

Getting pre-approved is a more complex affair, with a mortgage lender confirming your assets and income as well as checking out your credit. Once the lender completes the verification, the next step is for an underwriter to review your financial portfolio. If the underwriter runs across no problems, the underwriter will issue a letter that pre-approves you for a loan up to a particular amount.

According to Bankrate, if your financial situation changes after pre-approval, you still might not end up with a mortgage loan. Nothing is guaranteed until you receive the actual approval and the contract. Nonetheless, going through the pre-approval process after pre-qualification makes it more likely that you will successfully complete a real estate purchase. 

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