What is mortgage pre-qualification?
Pre-qualification means that a lender has looked through your creditworthiness and has decided that you should be eligible for a loan up to a certain amount.
But here’s the deal: Most often, the pre-qualification letter is an approximation—not a promise—based on the information that you give the lender and its based on your financial situation..
The pre qual letter is based on the information that you have provided to the lender. It may not be based on your current credit report, and it does not look past the statements you have made about your income, assets, and liabilities.”
A pre-qualification is merely an estimation that gives you an idea of the mortgage you may qualify for.
It can be helpful if you are completely unaware what your current financial position will support regarding a mortgage amount,It will certainly help if you are just beginning the process of looking to buy a home
Why is mortgage pre-approval better?
A pre-approval letter is the real deal, a statement from a lender that you qualify for a specific mortgage amount based on an underwriter’s review of all of your financial information: credit report, pay stubs, bank statement, salary, assets, and obligations.
Pre-approval will mean your loan is contingent only on the appraisal of your choice of home, providing that nothing changes in your financial situation before closing.
This makes you as close to a cash buyer as you can be and gives you a big advantage in a competitive market,
In fact, pre-approval letters paired with clean contracts without tons of contingencies can win a bidding war against all-cash offers possibly.
So take notice, While pre-qualification can be helpful in determining how much a lender is willing to give you, a pre-approval letter will make a stronger impression on sellers.
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