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Pre-Qualification vs. Pre-Approval

Whether you are purchasing your first home or considering what a second home ‘could’ be, it’s very important to get pre-qualified. Most lenders can pre-qualify you within hours (if not minutes), which will help you get an idea of what you can afford for a mortgage payment.

Getting pre-qualified does NOT mean that you are pre-approved.

(i.e.) Today you rent and have a car payment and you have really good credit. You connect with a lender and get pre-qualified for $250,000. You’re so happy! While looking for a new home and so excited about leaving the rental market, you decide, “Hey, I need to update my vehicle.” And you go out and purchase (because you have great credit and a good job) a ‘used car’ for $20,000. You continue your search, find the perfect place to call home – only to find out that you are not approved.

While your financial snapshot may look a certain way today, tomorrow it can change. If you take out more debt or open another line of credit / credit card, you are directly effecting your credit score and debt in equity numbers, which helps a lender determine what you can afford for a mortgage payment.

Dedicating time to having a clear understanding of your financial snapshot is very important when considering to purchase a home. If you find yourself not being qualified today – that doesn’t mean you won’t qualify and be approved in 6 months – it just means you will have a plan and you’ll need to stick to that plan. ┬áMost lenders provide great insight as to what you can do to help improve your scores.

Takeaways

  • Getting pre-qualified is very important when purchasing a home
  • Pre-qualification does NOT equal pre-approval
  • Avoid large purchases or opening lines of credit during this process
  • Align with a realtor and lender that you trust
  • If you’re currently not qualified to purchase a home
    • understand your short / long term goals
    • execute on that plan
    • and you will soon find yourself, Approved!

 

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My name is Cole Evans. I’m an Affiliate Broker with Compass Real Estate and I would be happy to help you find your next home, list your current home or help answer any questions you may have.

Cole Evans
cole@coleevans.co
615-775-4227

 

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