The mortgage prequalification and preapproval are integral parts of the mortgage application process. Call Better Rate Mortgage today to get your mortgage process started.
Are you planning to apply for a mortgage? If you’re a first-time homebuyer, you’ll come across many mortgage terms and phrases that it’s easy to get lost. Fortunately, we believe in making your mortgage application smooth and successful.
In our article today, we explore the terms Mortgage “Prequalification” and “Preapproval,” looking at what they mean and their differences. So let’s dive straight into it.
What Is Mortgage Prequalification?
Prequalification is among the first steps in the home loan application process. During the prequalification phase, the lender will ask for your financial documents and then use them to come up with a rough estimate of what amount you may be able to borrow.
Given that prequalification relies primarily on self-reported financial data, it’s a ballpark stage of the mortgage process. The most significant benefit of prequalification is that it’ll give you an idea of what you can and can’t afford. It also presents an opportunity to familiarize yourself with the application process and the various mortgage options.
What documents do you need for prequalification? Well, it depends on the lender. That said, most lenders will only ask for your credit reports, proof of income, and asset documents.
What Is Mortgage Preapproval?
Preapproval is a bit like prequalification but a tad more elaborate and conclusive. During this phase, you’ll need to provide official financial documents to prove your financial history and income stability. Then, the lender will conduct a diligent investigation of your assets, income, credit history, and pending debts.
The lender will also cross-check the information you self-reported during the prequalification phase. You’ll need to provide your W-2s, pay stub, monthly expenses, and a list of assets you own for the preapproval. If you already own property, you might have to present a copy of your home insurance policy and previous mortgage statements.
If you qualify for preapproval, the lender will send you a preapproval letter. This letter details the mortgage amount and the type of mortgage you should expect from the lender. This letter is a great plus if you’re out house shopping because you can use it to assure the seller that you can afford the home.
When Should You Get a Mortgage Preapproval?
The best time to get a mortgage preapproval is when you’re ready to talk to real estate agents or do your house shopping. It’s worth noting that, in some cases, you might get a higher amount than your preapproval amount. However, you’ll first need to find a reputable lender before that can happen.
The mortgage prequalification and preapproval are integral parts of the mortgage application process. Hopefully, you now have a firm understanding of both and can confidently apply for your mortgage. Remember, only a respectable lender can give you a reasonable mortgage with zero underhandedness.
Get in touch with Better Rate Mortgage today to get your mortgage process started.