This week we have a very special guest on the Linda Craft blog to help explain the difference between prequalification and preapproval. For first time home buyers, weaving through all the financial terminology can be a little intimidating! Kathryn Youngs, a mortgage consultant with Wells Fargo, has broken it down for us below!
“Two very common terms consistently used in the mortgage industry are “prequalification” and “preapproval”. It is easy to confuse the two, or to simply not know the difference between each one. However, it is extremely important to know how each one can affect the home buying process for all parties involved. Lenders should always educate potential home buyers throughout the process of obtaining a loan. As more and more homebuyers strive to gain knowledge before shopping for a home, lenders should help lead each customer down the path of getting prequalified or preapproved.
Prequalification’s are “unofficial” estimates of how much a person may qualify for when buying a home. Getting prequalified can be as basic and simple as having one conversation by phone between a lender and Wake County homebuyer. General figures are discussed about income, debts, assets, and credit. Nothing has to be verified on paper or reviewed by underwriters and a credit report does not have to be obtained during the prequalification process. Prequalifications are based on general and vague information provided during the initial conversation. This process is usually free but may not take into account all financial factors that are important during the loan process. This type of evaluation can help the homeowner get a basic idea of what they can qualify for but does not offer 100% credibility or guarantee mortgage approval to purchase a home.
Pre approvals offer confidence to buyers and sellers that the mortgage transaction will carry through to a definite approval and closing. Preapprovals are administered so the lender can evaluate a credit report, verify income and asset statements, and then pass along the file to an actual underwriter for a concrete approval. Raleigh home buyers can then prove they have the resources to purchase a home which in turn gives the seller confidence to accept a potential offer. Typically the cost to obtain a preapproval is very minimal and is always the better option.
Prequalification’s are administered often and in some cases can satisfy the homebuyer’s needs to get a general idea of what they qualify for. Preapprovals will always provide the safest and most accurate path during the home buying process.”
Linda Craft & Team takes pride in the strong relationships we have built with local mortgage lenders such as Kathryn. We can connect you with a mortgage professional today to see if you can purchase a home. You might be pleasantly surprised! Call us today at 919.235.0007 or visit our website http://www.lindacraft.com/.