Should You Get Pre-Qualified?

Many first-time homebuyers have similar questions when it comes to mortgage rates and the steps to buying a home. One of the most common sources of confusion surrounds the difference between mortgage pre-qualification and pre-approvals.

Getting pre-qualified is the first step in the home-buying process. This comes before a mortgage pre-approval and is a different process altogether. 

When you get pre-qualified by a lender, they will take a look at some general financial information including income, assets, and debt. This is a quick and easy process that will give you a general idea of how much of a mortgage you can be pre-approved for. A pre-qualification simply gives you an estimate, not a guarantee, of the mortgage amount for which you can expect to get approved.

Pre-qualification is a good first step for those in the early stages of the home buying process. It gives you an idea of how much you will be able to afford while helping you set realistic expectations when shopping for a home.

For many, the pre-qualification process will be an epiphany. They will realize that they should look at homes that are within their price range, reduce their debt, or continue to save up to get the home they really want. Since the pre-qualification requires little time or effort, it’s a good place to start.

While a pre-qualification is a good starting point, it can give people a false sense of hope. Some may be mistaken when a bank has given them a quote, when in reality, the pre-qualification quote is just an estimate. 

Getting pre-qualified for a mortgage and pre-approved for a mortgage sound like they might be the same thing, but there are important differences.

We’ve already detailed what getting pre-qualified means, so let’s bring you up to speed on what a pre-approval is.

A pre-approval is a more thorough process compared to getting pre-qualified. A mortgage lender analyzes your finances to find out the maximum amount of a mortgage you could qualify for and at what interest rate they will charge based on your current income and credit history. The pre-approval certificate usually specifies the mortgage amount, term, and interest rate to be charged. For a more detailed explanation, visit our blog post on getting pre-approved.

However, one thing about being pre-approved is that it does not guarantee that you'll get a mortgage loan for that specified amount. The approved mortgage amount depends on the value of the home and the down payment amount.

Essentially, the difference is that being pre-approved is a more accurate representation of what your possible mortgage will be like compared to being pre-qualified.

In short, you do not need to be pre-qualified when on your home buying journey. Getting pre-qualified may give you a better sense of how much you will qualify for, but you can also do the same with your preferred bank’s mortgage calculators. 

The pre-qualification process is another tool you can take advantage of when shopping for your first home. It helps you know how much you can afford, how much you should save and will help narrow down the types of homes that are right for your budget. Fortunately, our Terrace Park homes offers a variety of budget-friendly options for first-time buyers – with homes staring from the $300’s! Get your pre-qualification and pre-approval, then stop by Terrace Park in Laurel Green for your dream home!