Pre-qualification vs. Pre-approval When Buying a Salem OR Home

Posted By David Whitton @ Aug 8th 2010 9:53am In: Financing and Refinancing Your Salem Home

Although the terms pre-qualification and pre-approval are often used interchangeably, the two differ greatly in the process involved in obtaining them and in the benefits they provide when buying a Salem OR home. Here's what you need to know about each of them:

Pre-qualification:

salem or homeThis is a lender's informal way of estimating how much you may be able to borrow. It is based on the information you provide (often by phone), none of which needs to be verified or documented. Since a letter of pre-qualification gives you an idea of how much house and the amount of mortgage payments you can afford, the best time to get pre-qualified is as soon as you decide you want to buy a Salem OR home.

You supply to the lender unverified information about your income, assets, debts, and possible amount of a down payment. There is no cost involved in obtaining pre-qualification, and there is no commitment for either party. Understand, however, that a letter of pre-qualification does not mean you will get a loan; it is simply a ballpark figure of the amount you can afford to spend on your Salem OR home and an indication that you might qualify for a mortgage in that amount.

For an informal and quick estimate of your pre-qualification, visit www.banksite.com/calc/qualify. For a more in-depth analysis, go to www.mortgage-x.com/library/prequalification.html.

Pre-Approval:

This designation is a firmer commitment on the part of the lender and requires a more detailed and formal process which includes a credit check and employment verification. You will need to provide W2's, pay stubs (tax returns if you are self-employed), and bank and investment statements to verify your assets.

While this process is more detailed and complex, it is definitely worth your time and effort! Not only does it allow you to shop for Salem OR homes with more financial confidence, pre-approval also shortens the actual loan application process and often allows for quicker settlement. In addition, sellers appreciate the fact that pre-approved house hunters are serious about buying their property and that financing should not be a problem.

In Summary:

Pre-qualification:

1. Informal collection of data

2. No documentation required

3. Verification not done by lender

4. An estimate of the amount you might be able to borrow.

5. Not an entitlement to a loan; simply the first step in the Salem OR home buying process.

Pre-approval:

1. Comprehensive collection of data

2. Documentation required

3. Verification is done by lender

4. Certification of how much money the lender would most likely be willing to loan you

5. Not an absolute guarantee of financing. Funding won't be given until after the property appraisal, title search, and any other items needing verification have been completed.

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David & Dewey Whitton
The Salem Real Estate Group
6444 Fairway Avenue SE
Salem, Oregon 93706

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