Navigating the mortgage mortgage process can be tough. Laws change regularly and with so many different mortgage lenders and mortgage brokers offering a wide variety of mortgage products, it’s hard to keep it all straight. Working with an excellent mortgage broker such as Lisa Johnson of Lisa Johnson Mortgage Services in Prince George makes the mortgage process seamless and easy. If you’re looking to buy a home or refinance your existing home, contact Lisa Johnson today. In this blog post, we’ll review the distinction between preapproval and prequalification as it pertains to the mortgage lending process.
WHAT IS A PREQUALIFICATION?
Prequalification is usually the first step in the mortgage loan application process. In essence, you supply a mortgage broker or lender with a basic financial picture – including your debt, income, and assets – and he or she will give you an estimate of how much you can borrow. This is a quick process, only taking a few days at most. No documentation is required at this time and can be done over the phone or online. This is usually free as well. Loan prequalification for a mortgage does not involve your credit being pulled nor is it an analysis of your ability to purchase a home. Based only on the information you provide, a loan prequalification is meant to give you an idea of a price range of where to start when looking for a home. It usually is a letter from a lender or a mortgage broker who works with lenders, stating how much you qualify for in terms of a mortgage, which is based off information you provided.
WHAT IS PREAPPROVAL?
Home mortgage preapproval is usually step two in the mortgage application process. This entails a detailed application process, where your credit will be pulled, as well as providing a slew of information and documentation, such as pay stubs, income taxes perhaps, and bank statements. Lenders want to know all of your current assets (i.e. cash on hand, for example) and current liabilities (i.e. outstanding loans and loan amounts, for example) to determine your risk of default, or inability to pay the mortgage back. This mortgage application process also determines your interest rate. In essence, you are rewarded for having good credit with a lower interest rate. You’ll find out the definitive amount that you qualify for a home. However, some lenders do charge a fee for this process since it is much more involved than a prequalification. With a loan preapproval, you’ll receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level, which can be an advantage when you go to make offers on homes.
HOW LISA JOHNSON MORTGAGE SERVICES CAN HELP
In sum, it’s important to note that a mortgage prequalification and a mortgage preapproval is not the same thing. A prequalification is based on data you provide, while a preapproval is based off your credit report and documentation. A prequalification will get you in the ballpark of what you can afford for a mortgage. A preapproval will tell you exactly what you can reasonably afford for a mortgage.
Neither a home mortgage preapproval or a home mortgage prequalification is a guarantee of a loan since interest rates are subject to change as well as items on your credit report or your income. Furthermore, the property also impacts the approval process. However, both processes are important and can save you and your mortgage broker time in the long run when looking at homes to buy.
If you’re in the market for a home mortgage, contact mortgage advisor Lisa Johnson Mortgage Services today. She can do both a prequalification and a preapproval for a home mortgage. Once either or both of these is done, she can advise you on the best mortgage for you. Contact her today!