When shopping for a mortgage you’ll see lenders throw around terms like “pre-qualified” and “pre-approved,” but what’s the difference?
When it comes to mortgage lenders these terms are not the same. Pre-qualified does not mean the lender has approved you; you still need to complete the application process with the lender to be approved for the mortgage.
If you are going through the process of pre-qualifying with a lender you will be providing the mortgage lender your pertinent financial information. This could include an evaluation of your credit worthiness. Based on the discussion you have the lender you will get an idea of what you qualify for as far as mortgage amounts and interest rates. At this point the lender has not committed to these figures; you’ll need to have the mortgage lender draw up additional paperwork to lock in the terms and interest rate being offered.
If your lender has given you a “pre-approval,” this is more substantial than being “pre-qualified.” A pre-approval letter will provide the maximum amount they will lend you for your mortgage, and the terms of the loan. As long as these terms are met you should have no problem securing the terms and interest rates for the mortgage being offered.
It is always best to shop from a variety of mortgage lenders and brokers to secure the best mortgage loan for your situation.