Learning Center Article

Article: Home Loan Pre-Qualification vs. Pre-Approval

Once you've decided to buy a property, the first step is not to go house hunting. Instead, you should find out what you can borrow. In doing so, it is important to understand the difference between loan qualification and approval.

Pre-Qualified

Getting pre-qualified for a home loan carries little if any weight when it comes to actually getting the loan issued. Let's take a look at why.

Its time to buy your first home and you've done the research. The first step is to find out how much you can borrow. Down to the bank you go for a sit down with a friendly home loan officer. This person asks you questions about finances, salaries, credit and so forth. You might even be asked to fill out a short questionnaire. After a surprisingly short time, the bank officer suggests a loan amount of around $300,000 is probable. Being really helpful, the bank officer even prints out a form letter with your name and the pre-qualification amount of $300,000. Wow, that was easy...perhaps to easy?

The problem with pre-qualifications is they are based on best guesses. The bank officer looks at no hard facts. When it comes time to actually apply for the loan, you can be assured the lending institution isn't going to be willing to guess. In fact, you might be told you don't qualify for a $300,000 home loan when push comes to shove. You might only qualify for $250,000. In nightmare situations, you might not qualify at all because of credit problems. In short, home loan pre-qualification is a waste of time for the most part.

Pre-Approval

Getting pre-APPROVED for a home loan is definitely your best option. Getting pre-approved for a home loan is an excellent strategy because you actually go through the process. Issues such as income, credit scores, personal wealth and so on are resolved. At the end of the process, the bank agrees to issue a loan up to a certain amount contingent on an appraisal of the home you eventually decide to buy. The lender will produce a letter indicating as much, and it is a very valuable letter.

A pre-approval letter is instant gold in the real estate market. If you were selling a home, would you prefer a buyer with a pre-approval letter or one without? The answer is obvious and leads to another advantage. In the current market, it is likely you will be bidding against other parties for property. A seller is much more likely to select your bid because they know the loan process will go smoothly. This can make all the difference when it comes to closing a deal.

Determining how much money you can borrow is the first step in the purchase process. Just make sure you get a pre-approval letter, not pre-qualification guesses.

About the Author: Dan Lewis is with http://www.gwhomeloans.com - A San Diego mortgage company providing home equity loan, refinance and mortgages to San Diego home owners. Visit http://gwhomeloans.com/services.html to learn more about options for San Diego mortgages.

Your Home Buying, Selling, and Real Estate Resource

Home Buying Intelligence Magazine provides comprehensive real estate articles, mortgage guides, and real estate quizzes, for everything about home buying and selling. Our core goal is to provide factual information that will help our buyers and agents gain knowledge and make intelligent real estate investment decisions. We cover a very broad range of real estate, mortgage, equity loan, and insurance topics and provide varying subject depths for the home buying novice to seasoned agent.

Real Estate Quiz Zone

We have a Real Estate Quiz Zone to test your knowledge! Home buying and selling is a big deal financially, how well do you really understand it? Take a quiz and see how many questions you can answer correctly! To complete the quiz, click on the radio button of your choice for each of the questions. When you are finished, hit the "Check Answers" button at the bottom of each test page. Our quizzes cover everything about real estate: home appraisal, estates, property laws, mortgages, financing, agents, brokers, and more!

Real Estate Learning Center

Does the world of real estate terms, contracts, and mortgages seem like a big puzzle to you? It really can be quite intimidating. See our Real Estate Learning Center, where we provide comprehensive learning guides for everything about home buying and selling! From real estate investment, appraisal, insurance, and selecting the right real estate agent and listing broker. Make intelligent decisions on residential home mortgage, refinance, equity loan, home improvement, and house selling.

Our Service

This Service is designed to provide a community based forum for the open and free flowing exchange of home buying and real estate agent comments, opinions, experiences, and information. Although Home Buying Intelligence Magazine attempts to provide accurate information, it assumes no responsibility for any errors, inaccuracies, omissions, delays or other defects in any of the information provided as detailed in the Site Policy. All information and resources contained in the Service are fully protected by applicable copyright and trademark laws.

Home | Learning Center | Quiz Zone | Glossary | Contact Us | Site Map | Site Policy | Find an Agent | Link Exchange | Link Partners | Resources | Learning Center Map | Quiz Zone Map

© Copyright 2005, eCohesion LLC (727.502.0420). All Rights Reserved | Privacy Policy | By using this site, you agree to our Terms of Service.
    email: support-team   phone: 727.502.0420

January Issue

Departments

»Home Buyer's Corner
»Seller's Know How
»Learning Center
»Quiz Zone
»Glossary

Services

Selling Your Home?
Let REALTORS® Compete For Your Business!

Search MLS Listings
Homes101™ has a real estate agent waiting to help you find a home right now!

Find a Contractor
America's Premier Contractor Referral Service.

For Sale By Owner
Buy and Sell Real Estate Without Paying a Broker!


Resources

Free Estimates
Free Estimates from Qualified and Pre-screen Contractors.

Find a Painting Contractor
Professional Painters Referrals are Always Free. home improvement projects easier

Refinance your Home
Refinance your home to consolidate debt regardless of credit history.

Order Boxes Online
Next Day Delivery for Most of the USA.


Try a Pop Quiz
Home Buying Core Knowledge
Property & Ownership
Know Your Condos
Selling and Listing
Contracts, Terms and Condtions
Leasing & Rentals 101
Estates & Property Laws
Real Estate Valuation
Real Estate Terminology
All About Financing