Getting Pre-qualified or Pre-approved for a Mortgage Loan

When you are looking to buy a home, getting prequalified or preapproved for a mortgage loan is strongly recommended.

While there are differences between the two, both will give you an idea how much money you might be able to borrow and can show a seller that you are a serious buyer.

Prequalification can usually be done quickly online or over the telephone and it relies on self-reported information about your income, debts, and assets. After a review that may also include a credit check, a lender will then give you an idea how much you might be able to borrow and may discuss mortgage options. This process is likely to take anywhere from one to three days and you will get a prequalification letter.

Preapproval is a more formal process, requiring a mortgage application, credit report check, copies of pay stubs, recent bank account statements, W-2 statements, tax returns and a review of your assets and debts. You will also be asked about the size of the down payment you plan to make.

The preapproval process will take longer but it will give you a solid idea of what you can afford and can be a big benefit when dealing with a seller because it is based on verified numbers and your creditworthiness.

Be sure to talk with your real estate agent and your financial institution about how prequalification and preapproval can benefit you and your home search.