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
In business, one may come across the cash accounting method, also known as cash-basis accounting, during the accounting period. The cash method of accounting is used where payments are ...
Usually a fairly large site zoned and planned for the purpose of industrial development and located outside the main residential area of a city. Industrial parks normally are provided with ...
Brick wall where a space or cavity is left between the inner and outer walls and is usually filled with insulation. ...
The term endorsement can have various meanings depending on the context. In a business transaction, the parties sign a contract about the legal transfer of a negotiable instrument in ...
Highest bid to buy and the lowest offer to sell a parcel of real estate in a particular market at a specified time. ...
Created by the US Congress in 1965, the Department of Housing and Urban Development (HUD) is the agency principally responsible for federal programs relating to housing and urban ...
The addendum definition is an attachment, clause, or section added to an agreement or contract specifying additional terms, conditions, or requirements to the original agreement or ...
Right of a current stockholder to maintain the percentage ownership in a real estate company by purchasing new shares on a proportionate basis before they are issued to the public. It ...
A shallow yet funny definition of a tax specialist is someone who loved math since 1st grade. He or she has an elephant’s memory and is always up to date with the regulations and ...
Have a question or comment?
We're here to help.