If you’ve found the home you can’t stop driving by because you want it to be yours, it’s time to look into a home loan prequalification vs. preapproval. Prequalification helps you understand your ballpark budget, while preapproval shows you’re interested in buying. Understanding how these work and when to use them is the key to being a homeowner.
If you need help with this process, head to Champions Mortgage, your local mortgage broker in Houston, TX. We explain the difference between prequalification and preapproval in this blog post so you can make confident decisions during your house-hunting journey. But reach out to us if you ever need some more help.
Understanding Prequalification
Prequalification is your first step to securing a mortgage to start your voyage of homebuying. Getting prequalified isn’t a set-in-stone process; it’s merely a general idea of how much money you could borrow for a mortgage. Showing a seller your prequalification papers isn’t going to convince them that you’ll have money for the home.
When you get a prequalification, you can expect:
- A soft credit check that won’t affect your score
- You supply your financial information with or without proper documentation
- A loose ballpark estimation
Think of prequalifying as window shopping. You’re only looking at the possibilities, but you haven’t committed to purchasing enough to even walk through the door.
Understanding Preapproval
If prequalification is like window shopping, then preapproval is akin to trying on clothing in the dressing room with the intent to purchase. A preapproval will require:
- A hard credit check that will affect your score
- Thorough financial documentation to prove your income
- A more specific estimate of the home loan you can be approved for
Sellers take preapproval seriously and often use them as the deciding factor when choosing an offer. If you and another buyer have the same offer but they don’t have a preapproval, you’ll likely be the one who gets picked. Preapproval shows commitment to purchasing the home, and it shows that you’ll likely end up with a mortgage loan you can pay.
Our Advice on Home Loan Prequalification vs. Preapproval
So, when do you get a prequalification, and when is it time for a preapproval? Do you need both?
Prequalification isn’t necessary, but it can guide your search for the right home. You’ll have an idea of your budget so you’ll know which neighborhoods you shouldn’t bother looking at because they’re too expensive. If you stretch the hunting process over a year or two, you may want to do it again since the numbers could change over time.
Get preapproval once you find a home you’re ready to put in an offer for, but do it before you put in an offer. You don’t have to get a prequalification first, so you can start with the preapproval if your heart is set on a specific house. Putting in an offer along with your preapproval letter will show the sellers you’re serious and will give you an advantage over the less prepared.
Choose Champions Mortgage for Your Next Home Loan
Home loan prequalification vs. preapproval: which should you choose? We recommend prequalification when you first start looking, and preapproval when you’re ready to throw your bid into the ring. Don’t get your preapproval too early or it could expire.
Champions Mortgage can help if your pre-approval expires or if you have any other home loan questions along the journey. We’re a mortgage lender for all of Texas. Our low rates are better than credit unions’, and we can help you out in up to 15 days. Call us today at (281) 727-2500 to get started on buying your dream home.
