If you decide to buy a home, your real estate agent will recommend going to a mortgage lender before you start shopping, so you can get pre-approved. Getting pre-approved is a necessary step before you shop for a home, but it is not the same thing as getting approved for a mortgage. These two things are similar, yet there are some key differences with them, and here are some of these differences.
The Timing
The timing of getting pre-approved and approved is the first difference to understand. A pre-approval for home financing is something you will get before you shop for a house, and it is designed to help you learn how much of a house you can buy, and it is also designed to make sure you qualify for a loan to buy a house.
When you find the house you want, you move to the next step, which is getting approved for a loan. Therefore, the timing for getting approved for a mortgage does not occur until after you have selected a home to buy.
The Documents And Paperwork Required
The second difference between these two events involves the documents you must supply to the lender for each one. Getting pre-approved for a loan is easier and faster than getting approved for a loan, and this is partly because the lender will only verify a few things to give you a pre-approval. For a pre-approval, you will need to submit information to the lender, such as your income, job, and amount of cash you have on hand. The lender may also ask to check your credit score. From these factors, the lender will decide if you most likely qualify for a loan.
To get an approval for a loan, the lender will not only need all of the same financial details, but they may ask for more documents, including your taxes and pay stubs. Additionally, the approval will be based on the house you choose and details about this house.
The Actual Meaning
The third difference to understand is that getting pre-approved for a loan means something entirely different than getting approved. A pre-approval means that it appears like you meet the conditions needed for a loan and that the lender should have no problems issuing it. An approval means the lender will give you the loan, because you meet all the needed conditions.
If you want to buy a house, you should go through both processes, as this will make it easier for you to know what homes to shop for and to get a loan when you choose one. To start the process, contact a mortgage lender today.
