As you navigate the home-buying process, it’s important to understand the steps as well as the terms used by mortgage lenders, which are very likely to include pre-qualification and pre-approval.
Mortgage pre-qualification is generally a quick, simple process. You provide a mortgage lender personal financial information, including your income, debt and assets. Based on your information, the lender will give you a tentative assessment as to how much they’d be willing to lend you toward a home purchase. Pre-qualification can usually be done over the phone or online and often at no cost. A pre-qualification is not a guaranteed loan.
Mortgage pre-approval is a more significant milestone in the process because a lender is actually checking your credit and verifying your financial information. If you’re pre-approved, a lender is making an actual commitment (subject to conditions such as a property valuation) to loan you money. Pre-approval is not necessarily a guarantee that you will receive a specific rate or mortgage from that lender because circumstances may change from the time you get-preapproved until the time you’re ready to make a purchase.
Getting a mortgage pre-approval means you’re preparing to take the next step in the home-buying process. Consider working with a mortgage specialist to help guide you through the pre-approval process. Once you have selected one:
Pre-approvals are subject to your continued good credit and are usually good for 60, 90 or 120 days depending on the lender.
You are under no obligation by getting pre-approved, but you want to be comfortable with the amount and terms of your pre-approved mortgage. That's why it's essential that you review all your personal expenses and have a good idea of your future expenses before you talk with a mortgage broker or lender about pre-approval. Learn more about knowing how much you can afford.