The biggest asset for any person in the house in which they live. Building a house for the family is the primary dream of every next person. One of the best ways to purchase a house is to get a mortgage loan. All you need to do is pay the down payment while signing the mortgage terms and fixed monthly easy installments will be framed for the repayment of the mortgage. If you want to invest money and are planning to get a loan against the fixed assets, a mortgage loan is the best option for you. In order to qualify for the mortgage loan, certain pre-approvals or pre-qualifications are needed.
Is Pre-Approval And Pre-qualification Same?
Before the in and out of the mortgage including the eligibility, general procedure, terms of repayment and amount of mortgage loan approved are discussed it is important to know what mortgage pre-approval or pre-qualification means. Are both the terms same and influence the mortgage approval in the same way or they are different and pose different eligibility terms. The answer is mortgage pre-approval and pre-qualification are two different things and having one or the other or both affect the approval of the mortgage loan differently. There are certain similarities and differences between the pre-approval and the pre-qualification that will help you learn the basics of the mortgage with ease.
Mortgage pre-qualification is the first step to get the loan approved. For pre-qualification, you present your current financial status to the bank or other financial institutions. Through this, the banks get a clear picture of the assets, debts, and income of the borrower. Pre-qualification is usually done online or through phone and the companies charge zero amount for the pre-approval. The data presented to the lender is not scrutinized and the credit history is not verified by the lender. They only propose mortgage amount the borrower can get and the down payment or the signing amount to be paid by him. Actual approved mortgage value might differ.
The day you decide to purchase a new house and are willing to get a mortgage loan you need to file the pre-qualification documents as early as possible. The borrower is provided with a written estimate citing the mortgage loan amount that the borrower is eligible for based on the information provided verbally or is submitted online. There is no commitment of approval of the mortgage and the borrower needs to go through a verification process. The pre-qualification is meant to provide you the range within which you may purchase a house and whether purchasing it is a viable option or not.
It is the second stage after the pre-qualification where the borrower may expect a surety about the mortgage vale and the down payment that might be needed to be paid. Upon submission of the actual documents of the income, assets, and debts the particular lender will tentatively commit the mortgage amount. All the documents will be scrutinized by the experts hired by the lender and your credit history or score will also be checked for the final eligibility. While this process is not free of cost, you need to pay the application fees as well as the other expenses for the approval officer to pre-approve your mortgage requirement.
There is a list of the documents to be submitted by the borrower in order to get any loan amount approved. The first document asked by the lender is the income proof of the borrower. The income record of the past two years is generally checked by the lender. The borrower needs to provide proof of additional income along with the monthly income. Additional income proof might include the bonus or the alimony you got in the last two financial years. Secondly, you need to assure the lender that you will be able to pay the down payment or the closing amount by showing the proof of assets.
Next, you need to submit the credit history or the credit score which must be above the minimum value so that the lender might approve the loan amount. The proof of employment is another important document to be submitted with the bank authorities. This verification is done in order to be sure that the borrower is having fixed employment and income. If you are self-employed the lender will ask you to submit additional documents in order to check your credibility.
The lender generally provides the borrower with a letter of commitment which indicates the loan amount that the lender is paying you in order to purchase the house of your choice. Once the pre-approval is done, the borrower can start with the purchase of the land or the building. Most of the real estate agents and townships recognize the pre-approval and sincerely present the choices available with the borrower and inform them about the terms of the payment. The loan approval is still not guaranteed as the lender will do the other verifications and after the property appraisal and the title search, the mortgage amount will be approved. Get the right house for yourself in order to get the fastest mortgage approval.
The Bottom Line
Globally all the banks and the financial authorities extract the same meaning from the words mortgage pre-approval and pre-qualification. If you are dealing with some new lender than re-verify the meaning of the two terms in order to get the approval of the mortgage in the minimum possible time. The pre-qualification and the pre-approval safeguard the lender as well the borrower against any fraud or miscommunication. Always submit the correct documents and cooperate with the bank authorities for best user experience.