If you thought they were the same, you are not alone!
Mortgage Pre-Approval vs Mortgage Pre-Qualification
These terms are used interchangeably, however they are very different. It’s important to understand what sets them apart if you’re thinking about buying a home. Mortgage pre-approval and pre-qualification are two of the most common ways that a lender can let you know how much money you can borrow for a home. As such, they’re often confused with one another. Mortgage pre-approval is an official confirmation by a lender that you are eligible to apply for a loan. Mortgage pre-qualification is a simple estimate of how much you could qualify to borrow.
What is a Mortgage Pre-Qualification?
A mortgage pre-qualification is an estimate of your borrowing capacity. This is based on information you have given such as; your income, debt and credit score. The information provided by you requires no proof. With the information provided, a system gives you a mortgage pre-qualification amount. Since nobody has verified that the information you have provided, it is generally not adequate to give you the best idea of your budget. Pre-qualification is the first step in getting a ballpark idea of how much the bank will lend you for the purchase of a property. If you wish to buy a house within the next 3 to 6 months, it is best to have a pre-approval.
What is a Mortgage Pre-Approval?
A mortgage pre-approval is a lender’s written commitment to provide you financing for the purchase of your home. It is based on your given financial situation. The lender will run your credit history, check your income and assets. Once they have reviewed all the documents, they determine how much you can afford to spend on a home. This information is all verified by the lender in order to provide you your accurate borrowing capacity. Pre-approvals are usually valid for up to 120 days as long as your financial situation remains the same. The greatest benefit of pre-approval is that you’ll have secured lending and a lender to work with when it comes time to find your dream home.
It’s important to work with a mortgage broker who is responsive and caring to your situation. The mortgage broker is the middle man between you and the bank and good one could make all the difference. If you are planning to buy a home in Montreal and want to be referred to some of the best in the business, reach out to us below.