During the search for a good mortgage to purchase a home,
you are likely to come across the terms preapproval and prequalification.
It’s
important to understand and distinguish between them, as they are indicators of
the amount you can access in a mortgage loan, allowing you to focus your
efforts on searching for homes that are within your budget.
What Is It?
Prequalification is a type of mortgage approval and one of the initial steps banks take to verify whether a person can afford a mortgage. For prequalification, the bank gathers basic financial information about the interested party, including your debts and credit history.
The prequalifier will analyze the data you provide and give you an estimate of the amount that could be lent to you, along with the terms and conditions.
This type of preapproval is based on the information you provide rather than financial documents such as pay stubs, so prequalification is an approximate calculation, not a definitive one. This means it is not as reliable, and the bank can deny you the credit. Therefore, it is recommended to have the credit approved before signing any purchase contract.
Prequalification for a Home or Loan: What Is I”Prequalification for a Home or Loan: What Is It and How to Obtain It?
