The process of obtaining a mortgage and purchasing a home can be intimidating and overwhelming at times, especially if you do not understand all of the terminology used. This is especially true when discussing pre-qualification and pre-approval, as many borrowers think of them as the same thing. While they share some similarities, pre-qualification and pre-approval are two distinct steps in the mortgage application process. As a leading provider of lending solutions, the team at PHL Capital Corp knows how important it is to understand the differences between each step. That is why we have compiled some information to compare pre-qualification vs. pre-approval to help you understand what each step entails and how they differ.
The mortgage pre-qualification process is one of the first steps for obtaining a mortgage. In this step, potential buyers need to provide a bank or other mortgage lender with an overview of their general finances. This means that they will need to provide information on their income, debts, and assets. Once this information is provided, the lender will review all information and give the borrower an estimate of how much they can expect to be approved for. It is crucial to note that pre-qualification is not a guaranteed loan and should not be treated as a binding agreement.
Pre-qualification can be done online or over the phone and there is usually no cost involved. Loan pre-qualification does not include an analysis of credit reports or an in-depth look at the borrower’s ability to purchase a home, so it does not carry the same weight as a pre-approval. Regardless, it is an important initial step to complete as it gives borrowers the chance to discuss their potential mortgage options with a lender.
Getting pre-approved for a mortgage is the next step in the process. During this process, the borrower must complete an official mortgage application and provide a variety of information to the lender including:
Some lenders may also require borrowers to provide:
If the borrower is pre-approved after they provide this information, this means that the lender is making an actual commitment to loan them money. It should be noted that this commitment is subject to conditions such as a property valuation. This commitment also does not guarantee that the buyer will receive a specific rate, as circumstances may change from the date of pre-approval to the time that the buyer is ready to make their purchase. Regardless, being pre-approved gives buyers the advantage they need as it gives a much clearer picture of how much home they can afford and shows sellers that they are one step closer to obtaining a mortgage.
To learn more about our lending solutions, get in touch with the team at PHL Capital Corp. We can be reached by phone at 604-579-0847 and will be happy to answer any questions you may have regarding mortgages or our application process.