Understanding Pre-Approval vs. Pre-Qualification for a Mortgage

Congratulations! You have taken the first step towards owning a house. If you are purchasing a house for the first time in Burlington or considering a second residence in Hamilton, you need to know the available mortgage options for you. 

Are you confused by Pre-Approval and Pre-Qualification procedures for a Mortgage? Though they sound similar, they are different, and so are their implications 

Seeking the services of a mortgage professional helps First time homebuyers through the entire purchase process. They will help them through the intricacies of the mortgage process and solve their doubts while ensuring a seamless purchase process. 

Let us learn the differences while you finalize your preferred house.

Mortgage Pre-Qualification: A Starting Point

Mortgage Pre-Qualification assesses your initial borrowing capacity and provides a rough estimate of the mortgage amount you are eligible for, depending on your basic financial status. It is a quick and easy process. Most lenders or Mortgage Brokers in Burlington conduct it online or over the phone.

What to expect during an online or telephonic pre-qualification round

• You will be required to share details of your income, work status, and loans
• You will be required to share assets and your approximate monthly expenses. 
• The mortgage provider may perform a soft credit check 

Upon the completion of the Mortgage Pre-Qualification, you will get a fair idea of the loan amount you are eligible for. Also, you need to remember that the pre-qualification is an estimate and does not guarantee that you will receive the estimated amount as a loan for buying a home.

Mortgage Pre-Approval: Taking it a Step Further

A pre-approval procedure takes the mortgage process ahead. It offers an in-depth assessment of your borrowing capacity. The pre-approval procedure provides a lender’s conditional commitment for a specific loan amount. This is a step ahead of the mortgage qualification process.

What to expect during the pre-approval process

Submission of documents certifying your assets, income, employment, and liabilities, such as pay stubs, tax returns, bank statements, and investment certificates

The lenders may conduct a hard credit check, affecting your credit score. They will analyze your financial condition to determine the mortgage amount and eligibility. On approval, you will receive a pre-approval letter mentioning the loan amount, interest rate, and loan terms you are eligible for.

Let us understand why both pre-qualification and pre-approval are essential.

First, we need to understand the benefits of the pre-qualification process, which are 

Purchasing Capacity and Budget: Once you know your estimated borrowing capacity, you can look around for houses within that price range or budget.

Provides support to your purchasing decision: Having a pre-qualified letter demonstrates your seriousness in purchasing a house. It shows your strong intent to buy a house.

Comparison of Lenders: You can compare lending rates and terms received from various lenders to get a clear picture of your borrowing capacity and the best possible mortgage deal.

You can always seek the services of a Mortgage Broker in Hamilton to help you during the pre-qualification rounds. They are always ready to guide you through the process, help you contact various lenders, and help you understand the mortgage options available.

Now, let us understand the importance of pre-approval process

Importance of Pre-Approval Process for Mortgage

The benefits of Pre-approval during the home-purchasing journey are

• Better Negotiating Power - A pre-approval letter relates to your purchasing capacity to purchase the house. You can show your firm determination or intent to buy the property competitively.
• Seamless Closure of the Purchase Deal: With the financial details and papers related to buying a home, you can close the deal much faster and smoother.
• Confidence:  As you are aware of your borrowing capacity and limits, you can confidently embark upon house hunting and locate a house of your liking that fits your budget, too.

Choosing Between Pre-Qualification and Pre-Approval processes

For a sound mortgage process, it is necessary to go for both pre-qualification and pre-approval procedures. It would be best if you remembered they are distinctly apart but valuable in their way

• Pre-Qualification: This process is a must if you wish to get a general idea of what type of house you can buy considering your financial status. Moreover, it is quick and easy. Also, it does not impact your credit score.
• Pre-Approval: This process is a must when you are very keen or serious about purchasing a home and need to make offers to property sellers. A pre-approval letter strengthens your offer and clarifies your purchasing power.

If you are considering going ahead with private and second mortgages for your purchasing your second property, then you need to understand the relevant terms and conditions before going ahead.

Conclusion

Consulting a qualified Mortgage Broker in Burlington or Hamilton can be incredibly beneficial throughout the mortgage process. They are some of the best people who can guide you through pre-qualification and pre-approval. They will patiently answer your questions and help you secure the best possible mortgage for your home purchase.