Pre-Qualification or Pre-Approval: Knowing how much you qualify for is an important first step before starting your home search. Understanding the price range you and your agent should focus on, your down payment options, as well as monthly mortgage payments ahead of time, will help you to find and close on your ideal home quickly.
Pre-qualification provides you with a general estimate of how much you can expect to borrow. It’s easy and can be done over the phone or online. You provide the mortgage company or bank with information such as your income, debt, and employment information. In return you will be given a loan estimate.
Pre-Approval will give you the exact amount you qualify for and provides other advantages for making offers in a competitive market like San Francisco.
With a pre-approval, the lender takes an extensive look at your financial picture, including two years of your W-2s and tax returns, a credit check, debt/income ratio and how much you have for a down payment.
Being a pre-qualified buyer lets the seller know that you are in a position to buy now, which can give you a distinct advantage when there are multiple offers on a home.
Not all loan packages are the same. Going through the pre-approval process is a win-win situation that helps the lender create a loan package that fits your needs.