What is the difference between being pre-qualified versus being pre-approved for a home loan?
Pre-qualified is no more than a loan officer asking some questions regarding your income, debt, what you think your credit score might be, and what information might be on your credit report. And if it looks good enough based on what you tell the loan officer, then they certainly can give you a pre-qualification letter stating that you are qualified for a home loan. This will come with the condition that all information will still need to be verified and meet underwriting and loan program guidelines. This can often be given in just minutes. And the application for the loan carries a higher risk of not being able to get all the way through processing and underwriting once the information required for the loan starts being verified.
A pre-approval goes beyond that. A good loan officer will be able to give you better peace of mind that the loan will make it all the way through to you getting the keys to your new home. That loan officer will start the process of gathering from you basic documents to analyze and to verify information that you gave them before you even start shopping for a home. Some of the requested documents might be – a driver’s license and social security card to verify legal name and identity, as well as pay stubs, W2s, 1099s, and tax returns to verify income. Credit reports will also be pulled to verify FICO score, payment history, and other information on the report. By taking the time to properly analyze your situation, the risks are greatly reduced and there is a much greater chance that the loan will make it through processing and underwriting. Therefore, when the loan officer gives you a pre-approval you will be able to shop for a home with a much greater confidence.