Pre-Approved vs Pre-Qualified

You have been having these dreams of a perfect house for years.  Then, you pass this neighborhood and saw the ultimate answer to your dreams.  It is the house that you have dreamed of your whole life with a wrap-around porch and a spacious lawn where your kids can play.  Now, the only problem is securing that mortgage so you could start on getting that dream house.

Before you proceed in getting that mortgage though, you debate on whether you should get a pre-approved application or a pre-qualified one.  A friend told you that there are certain advantages to this.  So, what is really pre-approved versus pre-qualified?

Getting a pre-qualified application for a mortgage is just having a lender to simply take a look into your accounts or your situation financially as per the records you give them. The result of this will aid you in getting an idea on how much you are really qualified to borrow.  Since this is not really considered as an actual loan application, the lender only adheres to your word on your credit status, your assets and liabilities as well as your income.  This does not guarantee that you would actually get that home loan or mortgage amount that you were said to have been pre-qualified to get.   As there is no strict verification of your accounts, the pre-qualified letter that you will be getting will only tell you that you will probably be approved for a mortgage, which is not exactly the same as saying that you have actually been approved to get that amount.

If you want a better way of knowing how much you can really get for your mortgage, then going for that pre-approved application may be what you are looking for.  Getting pre-approved is basically having an exhaustive review and analysis done of your assets, income and credit.  The lender that you will be contacting will verify all your records and even look into reports on your credit status so the liabilities that you have will also be considered.  Of course, your assets and your income won't be part and parcel of the verification process though.  Yet, after this, you will be getting a pre-approval letter that will contain some statements about the analysis that the lender has made as well as a stipulation that you have been pre-qualified for a specific amount for your loan.

So, if you are gearing towards getting that mortgage for that dream house now, then it is best to decide whether you want to be pre-approved or pre-qualified.  You have to weigh the pros and cons of both appraisals so you will be able to get that loan amount that you think you can afford to pay.  Remember that after everything has been done, you will be finally having your dinner in that perfect house that you have always wanted for you and your family.