The mortgage process is filled with systems and terminology that the average homebuyer may not be familiar with. While preparing to apply for a mortgage, you may encounter the terms pre-approval and pre-qualification for the first time, and it is vital that you understand the individual role each of them plays in your home search.
Pre-qualification: What does it mean?
Pre-qualification is an initial step in the mortgage-seeking process. It typically involves describing your credit, debt, income, and asset situation to a prospective lender. After reviewing the information, the lender will give you an estimated loan amount you can expect to receive.
Most lenders (including MortgageRight) are flexible when it comes to this part of the mortgage process and will give the option to complete it over the phone, online, or in person.
Though pre-qualification is not a requirement when applying for a mortgage, it’s an exercise in helping you understand your financial fitness regarding a mortgage. It’s also the perfect time to learn more about the different mortgage options available.
Pre-approval: What does it mean?
Much like the pre-qualification process, you will need to provide your lender with information regarding your financial history and stability. The difference here is that financial documents are required and will serve as proof of your mortgage readiness.
Here’s a list of commonly requested documentation:
- W-2s (a current pay stub)
- A summary of your assets
- Your total monthly expenses
- A copy of your mortgage statement and home insurance policy if you already own real estate
After assessing the documentation, verifying your financial fitness, and running your data through an automated underwriting system, your lender will send you a pre-approval letter. This letter details the amount, type, and terms of the mortgage loan your lender is willing to offer.
While a pre-approval offer is not a guarantee, it does act as proof of your commitment to buying a home and can give you leverage in a competitive market.
Choose What’s Best for You
Whether you’re unsure about your financial standing when it comes to getting a mortgage or you’re ready to move on to pre-approval, MortgageRight can help you every step of the way. Call us at (205) 776-8401 to discuss the next steps in pre-qualification or get pre-approved today!