The Difference Between Pre-Qualified & Pre-Approved
Not everyone get’s pre-qualified first. Usually, the mortgage broker will go through a 50/50 state, where they decided whether being pre-qualified is the best fit for the client or if they should move straight to pre-approval. This all varies regarding what the client has in mind for a mortgage. From there, the process of determining what needs to get done will proceed.
What Does It Mean to Be Pre-Approved?
Getting preapproved may be a better indication that you’ll get approved for a loan, but it will all depend on the process. For example, if you’re preapproved for a credit card online, the card issuer might be using a preapproval and prequalified to mean the exact same thing. In that case, it becomes unknown what the best fit will be for the client.
Additionally, you may receive preapproval offers for loans by phone, or email. These pre-screened offers generally means that you appeared on a credit reporting agency’s list of consumers that meet a creditor’s criteria. The following documents are needed for pre-approvals:
- Identification:This proves you are who you claim to be.
- Bank account and investment statements:These prove to prospective lenders that you can pay your monthly payments.
- Proof of assets:Showing your assets, like a car, cottage or boat is important because it allows lenders to calculate your net worth, i.e. how much money you really have.
- Proof of income: To provide assurance to prospective lenders, pay stubs or a letter from your employer will do. A notice of assessment will be needed if you’re self-employed.
- Information about your debt: The information you need to provide includes student loans, car loans and credit cards. Lenders have access to databases of this information, and it will look bad if you try and hide it.
Whether you applied or received an unsolicited offer saying you’re preapproved, there’s still no guarantee you’ll get approved—especially if factors like your income, collateral or credit history have recently changed.
What Does Pre-Qualified Mean?
The mortgage pre-qualification process can be described as a more casual, estimated version of a mortgage pre-approval. To get pre-qualified, an aspiring homeowner would provide their general financials, including their income, assets, and debt, to the lender. It’s important to note that the pre-qualification process does not require a credit check. The lender would then assess the information given and provide the borrower with an estimated projection of how much of a mortgage they will be eligible to receive.
Requirements for prequalification can vary depending on the situation. You’ll need to provide the following documents to go through the pre-qualified process:
- Personal Information – Providing your Identification via photo ID
- Information on your current financial situation/state of bank accounts – Such as Statements of Account
- Further information on debts
- Source of down payment
- Consent to run a credit history search
- Information on your Current Property
- Proof of Employment – Income Confirmation
For some prequalification’s, lenders will check your credit through a soft inquiry—the type of inquiry that doesn’t impact your credit scores. Once you’re prequalified, you can choose to apply and undergo a complete review process. The review may require you to submit official documents, rather than estimates, and agree to a hard credit inquiry, which can impact your credit scores.
It is VERY important to have a clear understanding of the implications that may happen when it comes to choosing pre-approval and pre-qualification, and how it can affect you. It makes all the difference in future planning and can impact you in very significant ways.
At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.