What is the difference between being Prequalified and being Pre-approved?
At first glance, the two terms seem interchangeable, but they are very different processes and can mean the difference between a successful and a failed home purchase. Pre-qualification involves discussing your income, debts and assets with a lender, who evaluates the information and gives you general idea of what you could qualify for based on the information you have supplied. A prequalification is not a guarantee of a loan, as it is not based on the same documentation required for the actual loan process. However, getting pre-qualified is a great step to take before starting to shop for homes. It will help you put together a budget based on the estimate of what your monthly payment would be so you can avoid wasting time looking at homes that would not be a good match. Getting pre-qualified also gives you and your loan officer the ability to discuss your needs and goals prior to making offers.
Preapproval is a more formal process, involving a credit check and full review of income and asset documentation and checking the information using DU or LP (automated underwriting tools). This can, and should, be done prior to deciding which property you are interested in. After reviewing this information, you and your loan officer will be better able to choose a loan program that will work well with your needs and you will know the maximum loan amount you would qualify for. When a pre-approval is issued, you will receive a conditional commitment in writing for up to the maximum loan amount determined. Though a preapproval is not a guarantee of a loan, nor a guarantee of a specific rate or loan term, having a pre-approval gives you a distinct advantage when shopping for a home by signaling to sellers and listing agents that you are a serious buyer. Once you have an accepted offer, you and your real estate agent will notify the lender and your application will be complete and the loan process begins.
What documents will you need to get a preapproval?
Click on any of the headings to see more detailed information on the documents needed.
Please keep in mind that these are the most common items needed, you may be asked to provide additional documents depending on your unique situation.
Most recent 30 days of pay stubs, if you are paid bi-weekly you’ll need the 3 most recent pay stubs to ensure that an entire month is documented. This is used to calculate your base income and to determine if any overtime, commission or bonuses you have received can be used as income to qualify.