Pre-Approval and Pre-Qualification in Obtaining a New Home Loan

by Kelly Richardson
Loan Page Columnist

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When searching for a new home loan, many buyers become inundated with a barrage of new mortgage terminology. Two terms you will hear frequently are "pre-qualified" and "pre-approved." So the burning question is just which one of these stages of mortgage limbo should be in.

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If you think you should be in one or the other of these mortgage stages, you should know that you need both. The fact is that you will be going through both the pre-qualification and pre-approval stages during the lending process--just at different times. Both processes are necessary for your mortgage lender to determine if you are a sound investment for them, as well as how much money they will cover you for.

New Home Loan: Pre-Qualified

Pre-qualification is the first step and usually the faster of the two. In this stage, you can expect to:

» Give Your Financial History: Pre-qualification for a mortgage requires that you surrender your financial history to your lender, including debt, income, and assets.
» Get a Ballpark Figure: By looking at your financial situation, your lender will be able to give you a rough estimate of the maximum value of your new home loan.
» Get It Free: Pre-qualification for a new home loan should be a fast, free process. If you are charged for this service, you should be very wary about continuing the relationship.

Many mortgage lenders can pre-qualify you over the phone these days. With the speed and accessibility of information over the Internet, information can be acquired almost instantaneously.

New Home Loan: Pre-Approved

The pre-approval process is much more thorough, but more informative, as well. In this stage you can expect to:

» Submit a Mortgage Application: Becoming pre-approved for a new home loan usually requires you to fill out a mortgage application, which is an exhaustive examination of your personal and financial information.
» Pay Fees and Provide Documentation: The pre-approval process also entails paying a mortgage application fee, as well as providing documentation for verification.

Despite their official sounding natures, pre-qualification and pre-approval are just two of the stops on the road to home ownership. Remember, your mortgage lender wants to give you that new home loan. You are both on the same team.

Sources
Federal Home Loan Bank of Atlanta

About the Author
Kelly Richardson covers the local education and technology scenes in major cities across the country. His articles appear in educational journals, periodicals, and e-zines.

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