To preapprove or prequalify? Is there a difference?

outer banks

You want to have your financing lined up when you first start looking for a 1st, 2nd or Vacation home on the Outer Banks, but is there a difference between if you get preapproved or prequalified?

A prequalify is only worth the paper it’s written on. If you call a lender and give information over the phone, the lender may give you a PRE-qualification based ONLY on the information given to them at that time. There is nothing documented and none of your information is confirmed. You could tell them you are the Queen of England and POOF you are PRE-qualified. Not anything to take to the bank – it is a verbal okay based on the need to firm up the paperwork  and to see if indeed you are the Queen of England.

However, a pre-APPROVAL requires all the documentation to back up the information provided over the phone, a credit report with score, employment and rental verification. HOWEVER, even a pre-APPROVAL is not a guarantee that a lender will give you a mortgage. Once you have chosen a property, had the title work done and an appraisal, then then lender will give you a FINAL loan approval. A pre-APPROVAL is a step in the right direction and will give willing sellers a good idea you are a serious participant in the buyers’ market.

When you are house hunting and decide to submit an offer, I will take a copy of your approval letter to submit with your written offer. This shows the seller you are a bona fide buyer and are only waiting for an address to finish the approval and buying process.

Once you have provided your lender with the needed documentation and you receive a pre-APPROVAL letter, you lender will give you a good faith estimate on your closing costs and fees. You need to be careful because pre-APPROVAL letters have a shelf-life of up to 90 days. If you run past the expiration, you may have to provide new documentation and run the process over again.

There are also more reasons to get pre-APPROVAL than just to show others you are a bona fide buyer.

  • Know how much you can afford in your home purchase – whether it’s your 1st, 2nd or Vacation Home.
  • Know home much you can’t afford in your home purchase.
  • Know how much money you have to come to the table for with closing costs and down payment.
  • You may also find out through your loan officer if you qualify for any grants or programs.
  • You can also find out loan program is best for you and your purchase.
    • FHA? VA? Conventional? Other?
  • Also, if you do plan to have the seller pay for your closing costs, you will now have a pretty good idea how much to write in using your good faith estimate you receive.

If you need some help getting started, figuring things out or help finding a home, contact me today.  I would LOVE to help you find your dream house!

Follow me on Facebook!!