Prequalified vs. Preapproved Loans: What’s the Difference?
Whether you’re a first-time homebuyer or moving up the property ladder, the loan process can seem complicated. Mortgage loans are essential for most aspiring homeowners. Fortunately, the process can be straightforward with proper guidance.
At Altitude Home Loans, our team understands that a bit of information goes a long way toward relieving stress during the home buying process. We’re Tucson’s trusted home loan officers, and we’re here to help.
In this blog, we talk about two stages in the mortgage loan process that people often get mixed up: prequalified vs. preapproved. If you’re just getting started with your home loan applications, brushing up on what each of these phases means will help you prepare for every step of the journey toward your new home.
To learn more about home loans, buying a home, and more, browse our blog or reach out to us at Altitude Home Loans today.
What Is Mortgage Prequalification?
If you’re preparing to buy a home, you may already be familiar with the term “prequalification.” During this stage, homebuyers receive estimates on their borrowing potential. Lenders determine a buyer’s borrowing potential using several factors, including asset information, credit checks, and income.
The primary difference between a prequalified vs. preapproved loan application is that preapproved loans have been vetted and backed by the lender. Prequalified loans typically require more research before reaching preapproval. Many lenders may provide prequalification based on self-reported financial details, so be sure to be as accurate as possible.
If you’re an aspiring buyer beginning the home loan application process, it pays to:
- Check your credit score
- Obtain records of your tax returns
- Collect proof of income
- Obtain banking statements
Lenders generally require these documents during the early stages of mortgage loan applications. Having them handy will speed up the process for you and the lender.
What Is Mortgage Preapproval?
Mortgage preapproval comes after prequalification. During this stage, lenders take extra steps to verify a potential buyer’s credit history, income, and other financial information.
A preapproval letter provides buyers with proof of borrowing status and helps them shop for homes within an appropriate price range. Preapproval is a critical step and is as close to buying a home as a buyer can get without a purchase contract in hand.
How Long Does Preapproval Take?
Preapproval times may vary depending on the lending institution. Always check with your lender before beginning the mortgage loan application process. Be sure to ask critical questions such as:
- Application requirements
- What to expect during the application process
- Potential interest rates
- The current state of the real estate market in your target area
Learn More about Mortgage Loans
If you’re ready to buy a new home, don’t let the complexity of the mortgage loan process stop you short. At Altitude Home Loans, our team is here to help you learn about the steps when buying a house, including what it means to be prequalified vs. preapproved, how to choose the right home for your needs, and more.
To get started on your journey to a new home, reach out to us today.