Pre-Qualified vs. Preapproved
Another Method To Eliminate Unnecessary Stress
When it comes to buying a home, it’s essential to understand the difference between being preapproved and being pre-qualified. While both terms may sound similar, they can significantly affect your home-buying process.
Being pre-qualified simply means that a lender has given you an estimated range of what you might be able to borrow based on some basic information you’ve provided about your financial situation. This can be a helpful starting point for understanding your budget. Still, it’s important to note that prequalification is not a guarantee of a loan or a commitment from the lender to lend you money.
On the other hand, being preapproved means that a lender has reviewed your complete financial picture and has agreed to lend you a specific amount of money. Therefore, Preapproval is a much stronger indication of your ability to secure a mortgage, as the lender has thoroughly reviewed your financial situation and has committed to lending you a specific amount of money.
Here are a few key reasons why being preapproved is generally better than being pre-qualified when it comes to buying a home:
…Going through the preapproval process can be time-consuming, BUT it can save you time in the long run
1). It can give you a stronger negotiating position. When you’re preapproved, you can present a letter from your lender stating that you’ve been approved for a mortgage of a specific amount. This can give you more confidence when making an offer on a home, as you know exactly how much you can borrow and can make a more substantial offer as a result.
2). It can save you time. Going through the preapproval process can be time-consuming, but it can save you time in the long run by narrowing down your search to homes that you know you can afford. This can help you avoid the disappointment of falling in love with a home that is out of your price range.
3). It can give you a better idea of your budget. Being preapproved can give you a much clearer understanding of what you can afford, as the lender has thoroughly reviewed your financial situation and has committed to lending you a specific amount of money. This can help you make a more informed decision about what type of home you can afford and what type of mortgage is best for you.
4). It can help you close faster. Once you’ve found the home you want to buy and have made an offer that has been accepted, being preapproved can help you move through the closing process more quickly. This is because the lender has already reviewed your financial situation and has agreed to lend you the money, so there are fewer hurdles to overcome before closing.
5). It can protect you from rising interest rates. If you’re not preapproved, you may find yourself in the position of trying to secure a mortgage while interest rates are rising. This can make it more challenging to afford the home you want, as the higher interest rate will increase your monthly mortgage payments. On the other hand, if you’re preapproved, you may be able to lock in a lower interest rate, which can save you money over the life of your mortgage.
It’s worth noting that being preapproved doesn’t guarantee that you’ll get the mortgage you want, as the lender still has to review the property you want to buy and make sure it meets their lending criteria. However, being preapproved does give you a much stronger position when it comes to buying a home, as it demonstrates to sellers and real estate agents that you’re a serious buyer with the financial means to follow through on your offer.
In conclusion, being preapproved is generally better than being pre-qualified when it comes to buying a home. Preapproval gives you a stronger negotiating position, can save you time, helps you understand your budget, can help you close faster, and can protect you from rising interest rates. While the preapproval may be faster in the short term, it may deprive you of the confidence you need to purchase the home you found and love.
If you would like to learn more about
buying/selling a home, please feel to
reach out to me:
M: 931–548–6076
E: paul@paulperryrealestate.com
