When shopping for a home it always a good idea to check in with your mortgage lender and make sure that obtaining a mortgage for a property will be possible. Making sure there are no mistakes on your credit report and that income, debts and assets are in line is a crucial step to purchasing a home. Many home buyers hear that they should get “preapproved” or “prequalified” but often do not know exactly what the differences are between these terms, what exactly each entails or which one they should actually be seeking.
A pre-qualification is a simple review of a borrower’s credit, income and assets by a loan officer to determine if everything is on the right track and a mortgage approval is likely. Because these reviews are done only by the loan officer, the weight that these pre-qualifications carry is dependent on exactly how thorough this individual loan officer is with his review. The quality of the pre-qualification will vary with the quality of the loan officer. Depending on the experience of the loan officer and how well they reviewed the information, completely affects the quality of your pre-qualification. Uh oh, that can be dicey and lead to unexpected potholes down the road.