When you’re ready to purchase a new home, you may need to go through a bit of paperwork before you are financially approved. You must speak with a lender to be pre-approved for a mortgage loan, which will help you make payments on your new house on a regular basis. But often, in the real estate world, the terms pre-qualification and pre-approval get tossed around within the same conversation. So, what’s the real difference between these two terms? What is needed for a pre-qualification as opposed to a pre-approval? Is it necessary for you to have both before you can purchase your home?
At Peak Finance, we want you to understand the important differences – and similarities – between these two terms. Once you’ve gained an understanding, you can start to feel more comfortable at the beginning stages of the home buying process. If you have more questions about residential or commercial financing in Los Angeles, reach out to Peak Finance today.
What’s the Difference Between Pre-Qualification and Pre-Approval?
It can be confusing to understand the differences when your lender or mortgage professional talks about both. And, having them as a prerequisite does not necessarily mean that you will be granted the loan after all. Let’s look at some of the key differences between these two terms:
● A pre-qualification often happens before a pre-approval, although it can change depending on your bank. During this process, you provide your lender with your important financial information and history for them to decide whether you can potentially qualify for a loan.
● A pre-approval works much in the same way, although the lender will require you to provide proof of your assets and documentation, as well as display all of your debts. This step also requires a credit check, which can often make or break the pre-approval status.
In most cases, a pre-qualification does not require a deep look at your credit score, while a pre-approval does.
What Are the Similarities Between the Two?
In most cases, there are certain similarities between these two terms that you may notice. Some of these similarities include:
● Both can communicate a sense of responsibility and seriousness with a potential seller. Without a pre-qualification or pre-approval, you may not be taken seriously, as you may not have the finances required to purchase a home.
● Sellers will require that you have one or both to obtain any type of mortgage.
● Both will help lenders estimate the amount of the loan you can get.
Residential & Commercial Financing in Los Angeles
At Peak Finance, we are passionate about ensuring our customers are well-informed and financially fit to make the best decisions. For information on how to get approved for the purchase of a new home or business, you can contact us online. To speak to a friendly representative about residential or commercial financing in Los Angeles, you can give us a call at (818) 591-3300. We look forward to speaking with you!