What is Pre-Approval?

Pre-Approval is having a lender or mortgage broker review your finances and specify in writing the amount they are prepared to lend to you in order to purchase a property.

 

Should I get Pre-Approved?

Yes, when you are ready to purchase a property it’s a good idea to get pre-approved.

  • you will know which homes you can afford and not waste time on ones above what you can afford
  • your offer will be quicker and easier to submit when you find a home
  • some real estate companies will require pre-approval to work with you
  • you will need pre-approval to make an offer on a bank-owned property (REO)
  • you will have more time to research and shop for the best mortgage value, see some research here.

What is the difference between Pre-Approval and Pre-Qualification?

  • Pre-Approval is a thorough review of your finances by a lender or mortgage broker and their approval, via letter, of a loan amount they are willing to lend to you to purchase a property.
  • A pre-qualification is based on a conversation about your finances with a lender or mortgage broker without verifying your finances. This conversation may be important at the beginning of the process to determine a range in what you are able to afford to borrow and what mortgage packages are available.

If you are ready to purchase a home, follow-through with the pre-approval process.

 

Why would I wait to get Pre-Approved?

If you are not ready to purchase a home you may want to wait to get pre-approved. Pre-approval letters are normally good for between 60-90 days.

If you are looking for a short sale. These sales normally take a longer time, so you may want to time your pre-approval in consultation with your agent and lender.