One of the confusing parts of getting a loan is understanding the difference between being pre-qualified and being pre-approved.
Pre-qualified: Your lender looks at the financial data you provide and determines how much of a loan you might qualify for. This is not the final number the bank will approve you for, but an early estimate.
Pre-approved: Your lender will take a more in-depth look at your credit and finances. They will need copies of financial and employment documents for the lender to verify the information you have provided and approve your for a specific loan amount.
I highly recommend meeting with your lender and becoming pre-approved before looking at homes to purchase. If you fall in love with a home, you want to know that you can actually afford to purchase it – as will the seller. Most sellers will require a pre-approval letter to accompany your offer to purchase their property, and if you have not yet received a pre-approval, you could miss out on the home of your dreams.
This is part of the Real Estate 101 series, which explains the processes of buying and selling properties.
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