Pre-Approval vs Pre-Qualify for a Home Loan

Does it really matter if you get pre-approved
vs pre-qualified for a loan when searching for you home? In this video i’m going to explain the difference
between the two. Is one better then the other? Absolutely! Coming up. Century 21 NorthBay Alliance
Paul Brelin Hey what’s up ya all, this is Paul Brelin of Century 21 NorthBay Alliance helping you
to achieve your real estate dreams and goals. I’m building this channel to inform and
educate people on all things real estate in Sonoma County, including educational videos
like this one. So if you are new here, consider subscribing
and if you have any questions, leave me a comment and I’ll get back to you. Ok, let’s get down to it. What’s the difference between pre-qualification
and pre-approval? In the world of real estate the terms “pre-qualification”
and “pre-approval” are often used interchangeably. But they have very different meanings. Metaphorically speaking, if you are a gun
slinger at a target practice and the home is the target, the pre-qualification is your
gun, the pre-appraisal are your bullets. Since you will be competing with other gun
slingers to hit the target first, if you only get pre-qualified with your gun while your
competition is pre-approved with there gun & bullets, your competition, the gunslinger
with the gun & bullets, will be able to shoot at the target first 10 out of 10 times. If you are only pre-qualified and see a target
you want to shoot at then, you’ll need to jump in the car, drive over to the ammo store
to pick up the bullets, drive back, load the gun and then aim and shoot at the target. In this market, the target is often gone before
you even bought your bullets at the store. So what does a pre-qualification look like? A pre-qualification is an estimate of how
much you can afford in a mortgage payment. It is based upon the financial information
you provide to the mortgage banker including details such as income verification, asset
information and a credit report. The information you provide won’t be verified
as part of the pre-qualification process. Again, it an initial preliminary decision
of what you may be eligible for, it is not a full underwriting approval. What does a pre-approval look like? A pre-approval is a verified pre-qualification. It’s a firmer commitment on behalf of the
mortgage company and is a more formal process which will include a credit check and an employment
verification. During a pre-approval the mortgage company
does all the work of a full loan approval, except for the home appraisal and property
title search. A credit report will be obtained by the lender
to verify your monthly payments on instalment loans and credit cards, and to check whether
you have a history of making your payments on time. You will also need to provide paystubs and
W-2 forms (or tax returns if you are self-employed), plus statements from savings and investment
accounts to verify your assets. If you’ve been pre-approved for a loan, you
can shop for a house with more certainty and less anxiety because you won’t be going through
the whole process worrying about your mortgage approval. In addition to solidifying how much the you,
the buyer, can afford, getting pre-approved puts a you in a much better negotiating position
with the seller. The pre-approval tells the seller that the
bank has reviewed your credit and all your documents and you are truly approved for the
loan. However neither a pre-approval nor a pre-qualification
means you are guaranteed a mortgage. Lenders still need to look at property appraisals,
verify information, and in many cases, re-check your credit score before agreeing to make
a loan. So buyers, go get yourself pre-approved. In this market, you can’t afford not to. If you don’t have a mortgage lender already,
hit me up and I’ll recommend several excellent mortgage professionals that I always refer
my client to. So thanks so much for checking out this video,
defiantly subscribe for more videos just like this one. Until next time, I’m Paul Brelin Century
21 NorthBay Alliance. Remember, the agent you choose matters. Talk to you soon.

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