A non-binding process in which prospective borrowers provide preliminary information concerning income, debts, assets and credit to mortgage lenders. The lenders perform some calculations and estimate the size of home purchase they will likely approve
Prequalification is a non-binding process in which prospective borrowers provide preliminary information concerning income, debts, assets and credit to mortgage lenders. The lenders perform some calculations and estimate the size of home purchase they will likely approve.
Lenders may then issue a prequalification letter indicating what that home purchase limit is. This can help home buyers and their real estate agents concentrate on properties they can afford.
Prequalification is a good start, but because no loan application is taken, no information is verified, and in most cases no credit report has been pulled, so its value is limited.
Home shoppers who want to be sure that they’ll be approved for their purchase choose to get pre-approved for their loans, not just prequalified. Being pre-approved reduces the chance that an unknown credit problem or other issue could stop a purchase in its tracks. Pre-approval is also preferred by real estate agents and home sellers, because they know the approved buyer is serious, prepared and capable of closing the deal.
A pre-approved buyer is almost as good as a cash buyer.