Buying a home can be a stressful and overwhelming process, especially when dealing with mortgages. To ensure a smoother buying process, it is often worth seeking pre-approval for a mortgage. Although it is not a required step, it is helpful as it can give you a clearer picture of how much house you may be able to afford. As providers of lending solutions for 1st and 2nd mortgages, the team at PHL Capital understands how beneficial pre-approval can be. That is why they have provided some reasons why to get pre-approved for your mortgage alongside a definition of pre-approval vs. pre-qualification.
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Pre-Qualification vs. Pre-Approval
Though many potential buyers use the terms interchangeably, there are several distinct differences between pre-qualification and pre-approval:
Pre-Qualification
Mortgage pre-qualification is a straightforward and simple process where you provide a mortgage lender with information on your income, debt, and assets. Based on your information, the lender will give you a tentative assessment as to how much they would be willing to lend you toward a home purchase. Pre-qualification can be done over the phone, online, or in person, and often at no cost. A pre-qualification is not a guaranteed loan, however, and should not be treated as a binding agreement.
Pre-Approval
Mortgage pre-approval is a more significant milestone in the process because a lender has checked your credit and verified your financial information. If you are pre-approved, a lender is making an actual commitment (subject to conditions such as a property valuation) to loan you money. It should be noted that pre-approval is not necessarily a guarantee that you will receive a specific rate or mortgage from that lender. This is because circumstances may change from the time you get pre-approved until the time you are ready to make a purchase.
Why to Get Pre-Approved for a Mortgage
- Save time house-hunting by seeing only homes you can afford.
- Get a better idea of your monthly payment amounts and how much your down payment will be.
- When you make an offer to purchase, the seller may be more likely to give it serious consideration because you have solid financial backing.
- Your pre-approved status may give you more negotiating power with a seller.
- Some lenders may give you a rate lock so you do not have to worry about rising interest rates while you look for a new home.
- There is no cost to you and you are not obligated to accept the mortgage.
To learn more about pre-approval or to inquire about their lending services, get in touch with the team at PHL Capital. They can be reached through their online contact form and will be happy to answer any questions you may have.