What Is The Difference Between Being Prequalified And Preapproved For A Loan?
Are you wondering what is the difference between being prequalified and preapproved for a loan? Do you always get confused because they seem pretty much the same thing, right? But there is actually a fundamental difference between both.
And it is pretty simple to explain it:
When you receive a letter saying you're prequalified for a loan, it means that you POTENTIALLY could get a loan for the amount stated in the letter - assuming that all of the information they have on you (whether given directly by you or by credit report agencies) was accurate and true.
Now, when you're pre-approved, it means that you have already undergone the extensive financial background check - which includes looking at your credit report, previous tax returns and verifying your employment - and the lender is willing to give you a loan. You're APPROVED! So, they give you a letter that states such and it is usually valid for 60 days thereafter. Notwithstanding the above, you will have an accurate figure which shows the maximum amount that you are approved for.
Can you see what is the difference between being prequalified and preapproved for a loan now?
Preapproved is a done deal for a determined value should you decide to go further, while prequalified is an invitation to see how much under that specified value can you get once all your financial information is checked and your credit risk is assessed. Because of that, most home sellers prefer home buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.
Some real estate agents will even tell you to first get preapproved before going out shopping because the amount you will be able to get will define the ballpark at which you will be able to play in.
Popular Real Estate Questions
Popular Real Estate Glossary Terms
The time period a real estate investment is held. The return is tied to the time period of the investment. The period is used for income tax purpose to determine whether a profit earned or ...
Percentage of a geographic location's population to the number of persons employable by a basic industry in that area. A basic industry is one that draws income from outside the locality ...
A flexible price that may be adjusted. A resolved situation between two or people or parties through discussions in which common interests are modified. For example, real estate ...
The definition of reversion in real estate is the return of property or assets to their original owner after a prespecified event or occurrence. This real estate term is used primarily in ...
In real estate terms, many consider having corner influence an extra financial advantage when it comes to transactions in most cases. Usually, enjoying a corner influence brings an ...
Arrears is a legal and financial term used to describe payments in regards to their due dates. While the term is more often used to refer to a contractual obligation or liability that was ...
loan that is not secured by a mortgage on a specific property. It is backed only by the borrower's credit rating. Unsecured loan are typically short term. The disadvantages of this kind of ...
Income reporting to the Internal Revenue Service using form 1099 stating income earned. For example, An employing real estate broker uses form 1099 to report commissions earned by a real ...
Home inspector is the name the real estate industry calls the professional responsible for the close and thorough examination of a property. The home inspector usually is called upon ...
Have a question or comment?
We're here to help.