If you have ever applied for a home loan or planning to get one, you might have come across the terms, pre-approval, and pre-qualification. These are the two key steps involved in the home loan application process. Some individuals use these terms interchangeably, but there are important differences that every homebuyer should understand before applying for home loans.
In the case of a pre-approval, the bank will make an in-depth evaluation or analysis of the customer’s credit score, their annual income, net monthly income, debt-to-income ratio, and so on. This process is not done verbally unlike pre-qualification. Here, the bank executive will do a thorough background check of the customer’s details before approving the home loan.
However, getting pre-approved does not mean that you will qualify for the final loan approval. Pre-approval usually lasts for a set time, usually 60 days. After this, the bank’s pre-approval will be lapsed and then you might have to renew the same. However, if the appraisal of the property is not satisfactory, in that case, the bank will may not approve your loan, even if you get pre-approved. Also, if there is any change in your financial circumstances between pre-approval and approval, the bank may decide whether they will lend you or not.
|Do I need to file the mortgage application?||No||Yes|
|Do I need to pay the application fee? ||No||Maybe|
|Does it require a credit history check?||No||Yes|
|Is it based on a review of my finances? ||No||Yes|
|Does it require an estimate of my down payment amount?||No||Yes|
|Will the lender give me an estimate for a loan amount?||Yes||No|
|Will the lender give me a specific loan amount?||No||Yes|
|Will the lender give me interest rate information?||No||Yes|
Things you should not do after getting pre-approved or pre-qualified