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Mortgage 101: Prequalified vs. Preapproved

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This is an excerpt from our eBook, Which Mortgage is Best for You. Get the full eBook for FREE. Download here.

 

Whatever your motivation for home ownership, it’s a big step. Not only do you have to find a home you like, you also have to find a way to pay for it. For most buyers, that means taking out a mortgage. And if you’ve been researching mortgages, you’ve probably come across the terms “prequalified” and “preapproved.” These terms sound similar and are often used as synonyms, but they are two different things.

 

The difference between “prequalified” and “preapproved”
As a first-time home buyer, you’re going to hear a lot of different terms during your home-buying experience. It’s easy to get some of them mixed up. Two likely terms to be confused are “prequalified” and “preapproved.”

 

What is prequalified?
Being prequalified for a loan means you’ve talked to a lender about your income, debts and assets, and gotten an estimate of how much you can borrow based on that information. Prequalifying is worth doing if buying a home is still quite a way down the road for you. It will give you a general idea of where you might stand with lenders, but it doesn’t tell you whether you’ll get approved for a mortgage or how much you can borrow.

 

What is preapproved?
If you’re preapproved for a loan, you’ve given the lender the same information as in the prequalification process, except you’ll back that information up with documents. Also, your lender will check your credit. Preapproval is a step you should take as soon as you’re serious about buying a home with a mortgage. Without preapproval, you don’t know what you can borrow, what kind of loan you’re eligible for or if you can get a loan at all.

 

Once you’re preapproved, you’ll know what price range you can shop in for a home and what your interest rate and monthly payment will look like. Many sellers, and even some real estate agents, require buyers to be preapproved before they will accept a purchase offer or take them on as clients.

 

Want to learn more about how lenders decide the mortgage qualifying process? Check out our new eBook, Which Mortgage is Best for You. This eBook will show you:
 

  • Important financial questions to ask yourself before buying a home.


  • The pros and cons behind the most common mortgage products available today.


  • How lenders determine if you qualify for a mortgage.

 

Learn valuable information to help you make the best home financing decisions. Download this free eBook here.


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