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Friday, March 06, 2015

What is the difference between mortgage pre-qualification and mortgage pre-approval?

A mortgage pre-qualification is a basic screening process  that  usually reviews income, liabilities, credit histories, etc.  This can provide a general idea of ones ability to obtain a mortgage but it is very cursory.  When it is time to write an offer the mortgage pre-approval can provide the seller a level of confidence the transaction can close (although there will be boxes to check off along the way to closing)..

The mortgage pre-approval letter is the major supporting documentation for any offer.  The mortgage pre-approval process requires the lender gather information for verification.  This will require the lender to pull a credit report, verify income and employment history.

The mortgage pre-approval process will result in an approved maximum amount.
A key point, especially for inexperienced buyers, is the "approved amount" does not equal "must spend amount." 
The above highlighted point is becoming more important as the Brevard County, Florida market has shifted to favor sellers.  It is now becoming very common for buyers to find themselves in a multiple offer situation.   When several buyers want the same home it can become an emotional bidding war - not good!

Prospective buyers should answer these two questions when before they find a home they like:
  1. How much can I really afford
  2. How much do I really want to spend?
The answer to those questions is likely not found on the mortgage pre-approval letter.

When you are ready to buy a home in Melbourne or Viera, Florida, give me a call at 321-693-3850.  If you would like some references for mortgage lenders, please ask.

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