The Difference Between Mortgage Prequalification & Preapproval

    Published: 06-16-2009
    Views: 21,496
    Wells Fargo financial expert Tamara Broderick explains the difference between a mortgage pre-qualification and a mortgage pre-approval.

    Tamara Bodrick: Hi! I am Tamara with Wells Fargo & Company. Today we're learning about the ways to find out how much you can borrow and how to get pre-approved for mortgage loan.

    When you know how much you expect to borrow, you will have a price range before you begin looking for a home. Keep in mind that this price range does not include home repair and maintenance cost, which you will need to budget for as well.

    If you're still in the early stages of house hunting and want to know roughly about how much home you can afford, you can request a free mortgage prequalification at most banks.

    If you're ready to move forward, you can line up the financing ahead of time with the priority pre-approval that many banks offer, which requires a credit check and a completed mortgage application. You can identify and address possible qualification problems early in the home buying process.

    Obtaining a pre-approval tells real estate agent and home sellers that you are a serious buyer and have been pre-approved for a specific mortgage amount. Real estate agents and sellers increasingly rely on pre-approval to identify serious offers. This gives you a distinct advantage over buyers who are not pre-approved, it also adds to your negotiating strength when you are ready to make an offer on a home.

    You can be confident when you shop for a home, because you know how much you may be able to borrow. It may also allow for a faster closing, since much of the loan work is already complete. Pre-approval is not a commitment to lend, a commitment is contingent on verifying application information, satisfying all underwriting requirements and conditions and an acceptable property appraisal in title.

    Verification of this information is required for final loan approval. Remember neither a pre-approval nor a prequalification obligation to borrow from that lender. So there's really no reason not to get approved ahead of time.