Pre-Approved Versus Pre-Qualified: The Difference & Why It Matters
In the current market of fewer houses for sale than usual, every step of the process counts. Hiccups can cause valuable time, and it’s crucial to have a Realtor®’s guidance, especially when you may be competing against other buyers,
After finding a Realtor®, getting pre-approved for a mortgage is critical. This step is essentially an assurance from a lender that you, the buyer, are qualified to borrow up to a specific amount of money at a particular interest rate. A pre-approval letter makes the buyer look more serious to sellers and, in a competitive market, it also could help the buyer stand out among multiple offers.
You might have heard of getting pre-qualified for a mortgage, but there are some important distinctions to point out between being pre-qualified and pre-approved. So what’s the difference? For starters, pre-approval goes much deeper than pre-qualification. Look at being pre-qualified as a financial snapshot that gives you an idea of the mortgage you might qualify for – a glimpse into your finances, but not the full picture.
To get this “full picture,” a lender needs a lot of documents from you. Getting pre-approved for a loan can take anywhere from 5-8 business days. Buyers will need to provide at least two years of tax returns, several months of pay stubs and bank statements, and documents showing any additional sources of income, like social security payments, alimony, or military retirement pay.
Buyers should also check their credit report to make sure everything is accurate and take steps to correct any errors, as that could affect their interest rate or if they can even qualify for a mortgage.
To help make this process go more quickly, gather and organize all your mortgage pre-approval documents. Then compare rates from lenders in a short timeframe. It’s advisable to compare rates within a 14-day window. Doing so signals the credit bureaus that you’re shopping lenders, so they count all credit checks as one, which should have less impact on your credit score.
Getting pre-approval instead of pre-qualified might sound like a minor detail, but in a market like ours, every small advantage can make the difference between getting – or losing – the home you want. Purchasing a home can be an involved process, but your Realtor will be there every step of the way. That’s Who We R®.
Greater Chattanooga Realtors® is The Voice of Real Estate in Greater Chattanooga. A regional organization with more than 2,400 members, Greater Chattanooga Realtors is one of 300 local boards and associations of Realtors® nationwide that comprise the National Association of Realtors®. Greater Chattanooga Realtors service Hamilton and Sequatchie counties in southeast Tennessee, and Catoosa, Dade, and Walker counties in northwest Georgia. For more information, visit www.gcar.net or call 423.698.8001.