Pre-Qualification vs. Pre-Approved

Your family is growing, and you decide it’s finally time to get your first home.

Before you start looking at houses, you figure that it would be a good idea to see if you can afford one, first.

Your neighbor down the street suggests you get “pre-qualified” before you start looking for your dream house.

So you get pre-qualified. And you continue your home shopping, until you find one that fits you and your family perfectly.

Then when you approach the owner or their realtor to do the deal, and you talk to a mortgage company, everything falls apart when they tell you they can’t approve you for the mortgage.

So what happened here? You thought you were already approved, right?

Wrong.

You were “pre-qualified.” Which means a lender estimated the amount you could borrow to get your new home, based on information you provided to them.

The problem with this situation is that they went on the information you provided them. Instead of reviewing your credit report first.

If you had been “pre-approved,” that means the lender would have reviewed your credit report, your income, everything. Which enables them to say… “Yes, we’ll give you a loan for the price of that house.”

Which means you would then be pre-approved.

The moral of this story is: Be prepared. Before you go home shopping again, go straight to the lender and make sure you are pre-approved for an amount that will buy you the home you desire.

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