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
A group of investment bankers underwriting and distributing a new or outstanding issue of securities of a real estate business. a professionally managed limited partnership investing in ...
A cost of funds index that most adjustable rate mortgages written in California in recent years are tied to. Computed by the Federal Home Loan Bank of San Francisco, it reflects the cost ...
Expenditures incurred to improve a specific real estate development; however, these improvements are not directly on the property. Example are curbs, driveways, and streets. ...
Need to know the Ad Litem definition after coming across this weird term? Ad litem is short for “Guardian Ad Litem” or “Attorney Ad litem”, a legal term that ...
Loss of property from nonfulfillment of some duty or condition. In some cases, forfeiture is required by a court order, whereas in other cases the nonfulfillment of a contractual debt is ...
A way to sell and finance property by which the seller keeps title but the buyer takes possession while installment payments are being made. The gain is taxed while the mortgage ...
The right of a landowner to have lateral land support from adjacent properties. The right of lateral and subjacent support means that an adjacent land owner may not, for example, lower or ...
The term after-tax rate of return calculates an investor’s net return after income taxes. The calculation is used by many businesses and investors to determine their real earnings. ...
Shingles having uniform length, but random width. Random shingles give a creative appearance to a roof. ...
Have a question or comment?
We're here to help.