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
Fibrous, fire-proofing material that was used in buildings and homes for insulation. ...
The right and duties of using and holding property. ...
Typically, the term rider defines a financial concept, implying a written modification applied to an insurance policy, altering its initial clauses and provisions. The rider can update the ...
Use of other people's money (OPM) in an attempt to maximize the return but at high risk. The use of leverage in real estate investing is a way to maximize yield on a small down payment. ...
Property of a defaulted borrower is sold under court order, and the judge must approve the amount received. For example, Fidelity Bank has a first mortgage balance of $100,000 on Mr. X's ...
Brick wall where a space or cavity is left between the inner and outer walls and is usually filled with insulation. ...
Predetermined price for a contract that will be the same irrespective of the actual costs incurred to complete it. This contract is advantageous to the buyer because he knows beforehand ...
Latin for by itself. A per se matter is one that is alone and not connected to another matter. For example, age, per se, is not a determinant of health. ...
Capitalization rate used to convert the expected income derived from a property into its estimated asset value. The estimated asset value may be computed by dividing the annual income ...
Have a question or comment?
We're here to help.