WHAT’S THE DIFFERENCE?
Purchasing a home is very exciting and rewarding, no doubt about it. However, the process can also be confusing and overwhelming. There are many factors and issues that must be considered. You need to worry about the home details such as location, condominium or freehold, schools, proximity to essentials in your life, etc., etc.
However, the financing part of the purchase is also very critical and in fact, probably one of the most critical aspects of the home buying process. Yes, picking the right type of home, neighborhood, price point is very important. But so is the financing.
What Is the Difference Between a Mortgage Pre-approval vs. a Mortgage Pre-qualification?
Getting a Mortgage Preapproval
A mortgage pre-approval is the most valuable option. It is underwritten exactly as a mortgage approval would be, with the exception of the fact there is no actual property at this time to consider. All data required is captured, your credit is examined and your loan is underwritten as if it were an actual purchase. Once it is known what you can qualify for, an interest rate can be secured and locked in for up to 120 days. You will then be provided with a pre-approval letter along with a list of supporting documents that will be required to process your approval. Once you provide the documents and your underwriter reviews them, they will confirm that all is good to go with your purchase.
Getting a Mortgage Prequalification
For a mortgage pre-qualification, some basic information it taken from you; A credit report is optional by the lender. This results in a much less accurate estimate of how much you can afford. The lender is also unable to determine if there are any underlying issues in your credit report or otherwise that can be mitigated prior to your purchase. They simply rely on you providing an accurate estimate of your debt and credit score.
With pre-qualification, you won’t be as confident when shopping for a home since there has been no due diligence performed to determine your actual ability to qualify for a mortgage.
Beware
In looking for a suitable mortgage lender, ensure you know if you are being pre-approved or pre-qualified. Many, including lenders, use these terms as if they are both the same. They are not. Don’t go out making firm offers on homes and find out the hard way. You now know there is a difference.
Become an informed real estate buyer. Ensure you know your affordability and know what is going to be required from you to secure your mortgage.
If you think you’re ready to get started with purchasing a home, let us know and we can set up a free consulting session for you.
Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.
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