The process of obtaining financing for a large purchase requires preparation and organisation. Expect to provide financial documents, identification and proof of employment. However, applicants no longer need to go into the process cold. Today, online preparation tools exist to help individuals gauge their financial fitness and pre-approved financing chances. The following are some things to consider.
Pre-Approved vs Pre-Qualified
Pre-qualified and pre-approved are used interchangeably, but they are different. Pre-qualified is the first step toward pre-approval, and pre-approval leads to procuring financing.
A lender looks over an applicant’s income, assets and debt during the pre-qualification stage. Each lender has their own standards, but generally, they are assessing an applicant’s financial risk-level. This stage only deals with estimates, and nothing is set in stone. An applicant sees their financial circumstances through the eyes of the lender. You can agree to a credit check, which can take place over the phone. Individuals considered serious applicants are presented financing options.
Pre-approval follows pre-qualification, and takes the process up a notch. Income, employment and credit history are verified. If things check out with a lender, the individual receives a pre-approval letter. The letter lists mortgage options, terms and financing amount, which is an advantage. The only caveat is that the letter is not an official mortgage; it is an estimate based on the most current financial information. It is a sign that the lender believes an applicant is financially viable to pay back the financing borrowed.
Next Steps
A pre-approval letter gives the homebuyer credibility among sellers and other lenders. Your next step is to find the home. Then, officially fill out a home loan application and submit it for rubber stamping.
Pre-Approved Financing Conclusion
Whether you are applying for a mortgage or business loan, our Mortgage House team walks you through the pre-approved financing process. The time and effort prepare you to submit the application, which is when the official approval takes place. Setting your expectations beforehand gives you the opportunity to make adjustments. It also lessens the possibility of rejection.
