Getting pre-approved for a mortgage is a wise decision whenever you are looking for a home. It needs you to go through the majority of the processes required for a full-fledged mortgage application in order to determine how much home you’re likely to be able to afford—and how much lenders will allow you to borrow in order to do so. This is how the procedure works.
What Exactly Is a Mortgage Pre-approval?
A mortgage pre-approval is a document issued by a lender that informs a home seller how much money you are authorized to borrow to purchase a home. Furthermore, a mortgage pre-approval usually reveals the type of mortgage loan you qualify for as well as the interest rate the lender would charge you if you completed a mortgage application. The pre-approval document expresses the lender’s view that your mortgage application will be approved based on the income and credit information you’ve provided.
The information needed for a mortgage pre-approval is the same as the information needed for a mortgage loan application. In fact, requesting pre-approval is the same as requesting a mortgage loan: Your personal details, credit history, credit score, income, assets, obligations, tax returns, and employment history will be reviewed by the lender. It also requires you to give a lender permission to look at your credit score and credit report from one or more of the three national credit bureaus (Experian, TransUnion, and Equifax).
What Is the Difference Between Mortgage Pre-approval and Prequalification?
When looking for a mortgage, you’ll most likely come across a process known as mortgage prequalification, which should not be confused with mortgage pre-approval. After answering a few simple questions about your income, assets, and obligations online or over the phone, mortgage prequalification offers an estimate of how much money you may be qualified to borrow—but no data on interest rates, fees, or the like.