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2016-02-16 15:29:04
Prequalification vs. Preapproval: What to Know

Unless you have the cash to pay for a house in full upfront, getting a mortgage is part of the home buying process. But, lenders and banks don't just give out mortgages like they give out lollipops. They want you to prove that you'll be a reliable borrower first. Typically, it's recommended that you go through the home prequalification and mortgage pre-approval process before you start to look at homes or begin to work with a real estate agent. While prequalification and preapproval might seem synonymous, they are actually quite different.

Home Prequalification: The Initial Step

Prequalification might be something you consider when you are just beginning to dip your toes into the home buying waters. Bankrate s prequalification as a 'dry run of the loan application process.' When you get prequalified, you provide the lender with information about your credit history, income, and any assets you own. The lender uses the details you provide to give you an estimate of the size of the mortgage you can afford and what you might expect in terms of interest rates and fees.

What sets a pre-qualification apart from a preapproval is that the process isn't binding. The lender doesn't necessary confirm that the information you provide is correct. He or she doesn't run a credit check or call up your employer to verify your income. Often, the process of becoming prequalified takes just a few minutes and your lender might do it for free. In some cases, you don't even have to see the lender in person; you can complete the prequalification process online or over the phone. When you get prequalified, a lender isn't definitely saying that you'll be granted a mortgage, but instead is giving you an idea of whether or not you might be able to get one.

Mortgage Preapproval: You're Ready to Move Forward

Mortgage pre-approval comes into play when you're sure that you're ready to start looking at homes and want sellers and real estate agents to take you seriously as a buyer. During the preapproval process, a lender pulls up your credit report and score, contacts your employer to verify income and employment history, and asks you to provide documentation ranging from bank statements to tax returns. The process of being preapproved often takes longer than the prequalification process and you'll usually need to pay an application fee for it.

Preapproval is more concrete than prequalification. Your lender might lock in the interest rate you're offered in the pre-approval letter for a certain number of days. Plus, real estate agents and sellers like to see preapproval letters, as it reassures them that you're not only serious about buying, but that a bank has agreed to lend you the money needed to buy a home.

If you've got a preapproval letter in hand and are ready to start looking at homes in Utah, the Cowdin Group can help. Contact us today to see what homes are available in your price range and to learn more about the process of looking for, making an offer on, and ultimately buying a home.

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