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Why Pre Qualify For a Mortgage?

James Hussher

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You may have heard or read about getting “pre-qualified" or “pre-approved" for a mortgage while you are shopping to buy a home.

What is the difference between these two terms, and what is involved in the process?

First, let's define both terms.

Pre-Qualified means that a bank or mortgage broker has spoken with you, reviewed your loan application, and told you, based upon your verbal representations and perhaps no more, how much house you can afford to buy. The broker or lender usually then issues you a Pre-Qualification Letter good for 30 to 60 days that you can show to sellers and Realtors. The advantage to having such a letter is that it helps to demonstrate to those sellers that you are serious about buying a home and probably will be able to get the necessary financing to do so within the price-frame stipulated in the PQ letter. The letter is not a guarantee or promise from a lender that you will absolutely get the loan, it just indicates that you seem likely to be approved based upon your provided information.

The mortgage broker or lender will have asked you about your total household income and expenses, especially how much you spend every month on debt service: credit cards, auto loans, student loans, any other mortgages you may already have, etc.

You will have provided your own credit report or credit score, if you know it, and have stated how much money you have available to put down on a home. Based on this information, you are then, by several lending formulas, determined to be able to afford a home up to a certain price.

Pre-Approval is a more formal commitment to lend from a specific lender. Mortgage brokers do not pre-approve borrowers, only lenders pre-approve. The pre-approval process will involve more work on the lender's part: pull your credit reports and verify actual present debts and credit scores and payment histories. You will be asked to provide paystubs and tax returns to substantiate income. And then once again a letter is generated for you to show to sellers and Realtors. Once you are pre-approved, all that remains is to sign a sales contract and commence the actual loan process. The process is streamlined because all your basic supporting documents are already in the possession of the lender.

As always, the guidance of a competent Mortgage Planner can be of great value in the home buying process.

Please visit James at for mortgage needs. Apply online, check current offered rates and loan programs and more! James is a Certified Mortgage Planner and licensed in all 50 states.


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