Buying a Home → Before You Buy
Pre-Approved vs. Pre-Qualified
When you’re searching for a home to buy, we strongly recommend getting pre-approved as soon as possible in the process. If you end up finding the home of your dreams sooner than later, you don’t want to risk missing out on it because you’re not pre-approved yet!
When you’re pre-qualified, this means that you’ve provided a lender with a summary of your finances, including your income, debt, and assets. The lender will use this basic information to make an estimate of how much money you’ll probably be able to borrow, which will in turn inform how much money you can spend on a home. At this point, the lender will provide you with a pre-qualification letter.
This preliminary step is helpful when you’re first starting the buying process—it can shed light on what type of home you should be looking for, how much you will likely be able to afford, and what you may need to work on financially to put yourself in a better position to buy the home you want.
Getting pre-approved is more serious and official. This process involves having a lender run a check on your credit, and you must provide a lender with official documentation of your financial situation. Your lender will then be able to pre-approve you for a mortgage for a specific dollar amount, and you’ll also know what your interest rate will be, since this is partially based on your credit score.
Obtaining loan pre-approval ASAP can save a lot of time, energy, and heartache in the end—beginning your home search with a clear picture of what is truly possible is crucial to a successful home buying process. Plus, you may be pleasantly surprised at what you can afford—many people overestimate what their credit score needs to be or how much of a down payment they need to have saved to get into the home of their dreams!