Many times buyers wait to apply for a loan before they have found a home to buy. This process leads to pre-approval of the buyer and helps minimize the challenges to buying a home, especially in today's market.
Pre-qualification by a mortgage officer is a simple procedure that gives you an opinion or estimate as to how large a loan you can qualify for. It is based on an informal review of information you provide, typically without investigation of income, assets or credit reports.
Pre-approval entails making a complete loan application, including the verification of income, assets, and review of credit reports. The bank or mortgage company issues a preliminary loan commitment to purchase property subject to conditions such as clear title and adequate appraisal. Pre-approval commitments typically have a time limit, so as soon as you are pre-approved, you will want to start looking at homes.
Pre-approval provides a number of advantages:
