What is the difference between “pre-qualified” and “pre-approved”?
If you are “pre-qualified” you have determined, with a loan officer, what price you can afford based on the down payment, your debts and the amount the mortgage company will approve for your mortgage. Being “pre-qualified” is only a determination of your probable credit.
If you are “pre-approved”, your credit, employment and funds have been approved by the lender.
Current times show that with lender’s tightened credit standards it’s HIGHLY recommended you get a mortgage loan pre-approval. Can you imagine looking at MULTIPLE homes, finally finding “The One” and then finding out you can’t A) actually afford it or B) even get the loan? The time wasted, the fuel wasted, the disappointment.
Getting Pre-Approved will make the entire Home Buying process so much easier for you. You’ll know what you can afford so you’ll know what homes you can look at in your price range. It makes you a secure, serious, powerful Buyer to Sellers and Sellers are more likely to accept your offer – especially if there are multiple offers on a home and the other potential Buyers haven’t been pre-approved.
It also makes you a very savvy consumer allowing you to shop around for the best mortgage rate which can save you thousands $$$$ over the term of the loan.
If you’re a qualified Veteran you have the added advantage of the VA Home Loan Guarantee.
Most VA Home Loans are handled entirely by private lenders and the VA rarely gets involved in the loan approval process. VA “stands behind” the loan by guaranteeing a portion of it. If something goes wrong and you can’t make the payments anymore, the lending institution can go to the VA to cover any losses they might incur. The VA loan guaranty is the “insurance” that the VA provides the lender.
The guarantee VA provides to lenders allows them to provide you with more favorable terms, including:
- No down payment as long as the sales price doesn’t exceed the appraised value.
- No private mortgage insurance premium requirement.
- VA rules limit the amount you can be charged for closing costs.
- Closing costs may be paid by the seller.
- The lender can’t charge you a penalty fee if you pay the loan off early.
- VA may be able to provide you some assistance if you run into difficulty making payments.
You should also know that:
- You don’t have to be a first-time homebuyer.
- You can reuse the benefit.
- VA-backed loans are assumable, as long as the person assuming the loan qualifies.
More information concerning the VA Home Loan Guarantee process can be found here. – U.S. Dept of Veterans Affairs Home Loans
Also, outstanding information and help can be found at VeteransUnited.com
Getting Pre-Approved is the smartest way to start your Home Search.