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Mortgage Loan Services: Pre-approval and pre-qualification

Pre-approval and pre-qualification: Two real estate terms that are often used interchangeably but have a distinction that could cost you your perfect home. First and foremost, a bank will not provide a loan until you are pre-approved. Many people think they are pre-approved for a loan after a pre-qualification session with a mortgage professional, however, this is a common misconception. Read on to better understand the difference between pre-qualification and pre-approval.

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When you are a first-time buyer, the pre-qualification process is an easy, often cost-free step to approximate the amount of a mortgage you are eligible for based on a quick, top line review of your finances. If you are looking for an initial indication of whether or not you will qualify for a loan, pre-qualification will give you that. A mortgage professional will review your assets, debts and annual income and may discuss various types of mortgages with you at your request.

A pre-approval certificate may be issued indicating that the mortgage professional has reviewed your finances and has made the assessment that you may qualify for a mortgage loan up to a certain amount. Don’t confuse the pre-approval certificate with being pre-approved! As we said above, completing the pre-qualification step does not guarantee that you will get a loan. This is a ballpark figure that helps buyers understand what they may be able to afford and plan their house-hunting process accordingly.


With pre-approval, you are technically applying for a loan with a specific mortgage amount to be determined later (if you haven’t found your new home yet). You typically pay a deposit, sign the application, and then the application goes to the lender and through the underwriting process. The advantage of getting pre-approved is that you’ll receive a commitment for a loan up to a certain amount that is conditional upon an appraisal of the home you desire to purchase. You may be able to lock in a specific interest rate, but if this isn’t a possibility, you will at least get a sense of what rate you’ll be charged on your loan for planning purposes.

With this conditional commitment, you’ll be able to shop for a new home armed with proof that you qualify for a loan. This is a big advantage with sellers; if it comes down to a pre-approved buyer versus a buyer who has not been pre-approved, the former will likely be looked at more favorably. As a pre-approved buyer, you have time on your side. In other words, you can move quickly and submit an offer right away when you find a property that fits your criteria.

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Both pre-qualification and pre-approval are steps that will help you gauge what you can afford which is arguably the most important consideration when it comes to buying a home. Buying beyond your means can result in missed mortgage payments, loan defaults and possibly foreclosure down the line. Make sure you can still live comfortably after you take on a mortgage. Your livelihood depends on it. If you are faced with mortgage problems, call us at McFarlin LLP. We’re here to help.