Prequalification vs Preapproval In The Home Buying Process
Key Facts To Know About Prequalification vs Preapproval
Prequalification vs Preapproval are significantly different terms. Know what these terms mean BEFORE starting your Arizona home buying process. Many first time buyers or individual who have not bought a home in some time do not know what these terms really mean.
Or how having a prequalification vs preapproval may effect their ability to buy a home in Tucson Arizona.
In today’s mortgage environment every potential buyers needs to understand the meaning of prequalification vs preapproval.
Here is how a mortgage lender defines prequalification vs preapproval.
Prequalification is the initial step in getting a mortgage. The potential mortgage lender wants to know the overall picture of your financial situation. Information a lender will want includes your income, assets and any debt.
Based on this information a lender will be able to provide an estimate of the mortgage a person will qualify for. The estimate is based on the information you have provided WITHOUT verification by the lender.
Therefore the “Prequalification” is just that. Prequalified means “without verification”. An estimate of how much you could borrow BEFORE all of the financial information is submitted and verified.
In Arizona, a potential home buyer must submit a mortgage prequalification with their offer to purchase a home. It is REQUIRED.
Preapproval is the next step in the mortgage lending process. This step usually completed after the purchase offer on a home has been accepted by the seller. Preapproval ususally starts after an offer to purchase a home has been accepted by the seller.
The lender will require you to submit documents related to your income, assets and debt. The lender will “verify” that information. After the verification process the lender will confirm the your ability qualify for a loan. Additionally, the lender will indicate the amount of the mortgage they will lend to you.
Prequalification vs Preapproval which is better?
When you are buying a home in Arizona must submit a Prequalification form with their offer to purchase a home. However, should the next step – preapproval – limit the mortgage amount required, the you may not be able to purchase the home you want.
Accordingly, having the preapproval BEFORE you start your home search is recommended. You will know exactly how much you can borrow and much you will need as a down payment.
This will also help the realtor you choose to work with. Knowing the amount you can afford will narrow the home search. This will help you to find and purchase your new home more quickly.
Submitting an offer that shows you are “PREAPPROVED” will give the seller better assurance your offer is good and their home will be sold. Having a preapproval will put you in a stronger negotiating position!
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One other thing, you will need a home insurance policy to be in place BEFORE you can close on the purchase of your home. In Tucson, contact 4Tucson Insurance to get a quote.