Prequalification versus Preapproval
When you are ready to start your homebuying journey, the first step is to get prequalified or preapproved. Both of those terms sound very similar are they are similar, but being prequalified is an estimate of what you may get approved for. Your loan officer will ask you some questions about your income, debts, and credit. They may even pull your credit or you may give them your score if you have recently reviewed you credit report. This can give the real estate agent a basic idea to start sending you home search results. Before you go visit a home, you should always make sure to get preapproved so you know for certain how much home you can afford. If you like a home, you’ll want to place an offer and you can’t do that without a preapproval.
You don’t have to buy a house at the max of your qualification. You may qualify to borrow more money than you are comfortable spending on a home. In that situation, limit your home search to houses priced at a monthly payment you are comfortable with. You can use our affordability calculator to play around with the numbers.
Getting preapproved involves very similar information except more of the information is verified. For your credit review, a tri-merged credit report is pulled. This includes all 3 credit bureaus: Experian, Equifax, and Transunion. Your middle score will be used for credit qualification. Other factors like past bankruptcy and mortgage late payments will also play a role in qualification. The credit report will also serve as verification for your debts. For verify your income, past W2 and paystubs will need to provided.