Step 4: Get pre-qualified and pre-approved
As you work with your mortgage loan officer, you'll go through the process of pre-qualification. This is the first official step of securing a mortgage. You'll provide your lender with an overview of your finances, including information on your income, assets and debt. The lender will evaluate the provided information and provide you with an idea on the loan amount you may qualify for.
It may seem like you're ready to search for a home and make an offer now. But there's a difference between pre-qualification and pre-approval.
- A simple process with few requirements
- Possible to do in person, over the phone or on the internet.
- Not an evaluation of a borrower's credit report.
- Not an in-depth analysis of the borrower's ability to purchase a home.
Pre-approval, on the other hand, is:
- The completion of an official mortgage application.
- A comprehensive submission of required mortgage documents (listed in step 2)
- An extensive evaluation of a borrower's credit and financial background.
In most cases, if you're pre-approved you'll receive a conditional pre-approval letter, stating the exact loan amount you're qualified to take out.