It’s a frequently asked question among homebuyers using a VA loan for its affordable monthly payments, or any other purchase mortgage. Mortgage pre-approval and pre-qualification may be essential steps in getting a home loan but their definitions tend to be blurred.
There’s actually a vast difference between getting pre-approved and pre-qualified, each being a separate but connected stage in the mortgage process. And if you’re looking at being successful in buying a home using a VA loan, it’s best to look into where each step will take you.Click here to get matched with a lender.
Of Mortgage Pre-qualification and Pre-approval
Before you even start worrying about buying that home you visited over the weekend, ask yourself first how much you can borrow to acquire the property and whether you can qualify for a mortgage.
This is where getting pre-qualified and pre-approved enter the homebuying scene.
Getting Pre-qualified: Your First Step Toward Getting a Mortgage
A pre-qualification involves a cursory look at your financial information, particularly your credit information.
The lender works with what you provide them, assets, income, credit score. After which, the lender will give you an approximation of what it can lend you based on the financial information you’ve given.
Being pre-qualified therefore is a preliminary step in getting a mortgage. While it can prove to the seller that you can borrow this amount, the pre-qualification letter does not equate to any commitment from the lender to give you a loan.
To take things to the next level, proceed to getting a pre-approval letter.Let’s help you find a lender.
Pre-approval: A Step Closer to Buying a Home
A mortgage pre-approval is a more involved process than a pre-qualification. Here, the lender will evaluate all of your financial information, e.g. credit, income, employment, assets, and reserves based on your loan application.
Yes, you have to complete a mortgage application and pay a processing fee to begin the pre-approval process. For the lender to evaluate and verify your creditworthiness, you have to present various documents together with your loan application.
At this stage, the lender will pull your credit report, which results in a loan inquiry. Because this inquiry can knock off some points of your credit score, it’s imperative that you have shopped for lenders and decided how much pre-approvals you need.
All things being considered, getting pre-approved means that you qualify for a mortgage. A pre-approval letter is the closest thing you can get to become a cash buyer. While it’s not a loan per se, the letter will signify that you have financing lined up for the home. The seller can take your offer seriously.
The pre-approval letter represents a conditional commitment from the lender to give you a certain amount at what price. This “conditional offer” will expire in 90 days or so; still, it’s possible to lock in rates while in the pre-approval stage.
Getting pre-approved does not mean getting a mortgage, though. You need to have a loan commitment from the lender for that. And getting a loan from that lender or another is contingent on a number of things such as the appraisal on the home and your financial picture being the same if not improved before the closing date.
Getting Pre-approved for a VA Loan
If you want to know how much you can possibly borrow for a home, get pre-qualified for a loan.
If you want to be assured that you can qualify for a mortgage, get pre-approved for a loan.
Getting pre-approved for a VA loan leads you closer to buying a home and financing it with a loan that does not require a down payment and a mortgage insurance. It is also competitively priced and closing costs are limited so you won’t have to pay much to get the VA loan.
You can start your pre-approval process with any VA-approved lender. Click to See the Latest Mortgage Rates»