Prequalification and pre-approval are two terms that sound quite similar, but they actually mean very different things. These are both essential steps in the mortgage loan process. One gives you an idea of what your purchasing budget might be when shopping for homes for sale in Irvine, while the other serves as a formal statement of how much a bank is actually willing to extend after your financial profile has been reviewed.
Prequalification is a short, simple process that does not entail any extensive investigation of the buyer’s income, expenses, and assets. In fact, many people are able to complete the mortgage prequalification process online and in mere minutes.
Consumers supply a very nominal amount of information to lenders concerning their debts, their income, and the assets they currently own. Based upon their assessed purchasing power, lenders will then issue an estimate of the amount of money that these individuals might be qualified to borrow.
A prequalification estimate is in no way a guarantee of funding and it cannot be used to back any offers that are made on homes. It is strictly used for budgeting purposes during the most formative stages of the purchasing process. Buyers will still need to complete formal mortgage applications and there is still the likelihood that mortgage loans will be denied.
Loan pre-approvals carry significantly more weight than prequalification. If a buyer has been preapproved for a home loan, this means that his or her application has been submitted and the included information has been both verified and accepted by the lender.
At this time, lenders will establish a loan amount and issue a pre-approval certificate that can be shared with sellers when submitting offers. Pre-approvals specify the amount of money that borrowers have actually been approved to receive, however, these funds are not absolutely guaranteed until the loan application has been sent to the mortgage underwriter for final processing. Thus, although pre-approval certificates can be used to back offers on homes, buyers and sellers should be cognizant that funding can still be denied even after these certificates have been issued.
When you’re a first-time homebuyer, working with an experienced real estate makes all the difference while wading through the home-buying and mortgage process. When you’re ready to start your search for the perfect Irvine house for sale, reach out to Irvine Residential Living at (714) 454-6304 and take the first step to home ownership!