Prequalified vs. Preapproved: What’s the Difference?
Understanding the difference between prequalification and preapproval is an important first step toward homeownership. Both give insight into how much you can borrow and show sellers you’re a serious buyer.
Table of ContentsStart the Preapproval Process
Must be 18 or older to apply. Loans subject to credit approval.
Key Takeaways
1
Prequalification is a quick look at what you might be able to borrow based on self-reported financial information.
2
Preapproval involves a more thorough check, including your credit, to give a better idea of what you can borrow.
3
A preapproval letter can strengthen your offer on a home, showing sellers you're a serious buyer.
4
Both steps are important in the homebuying process, but preapproval carries more weight.
Table of Contents
Key Differences Between Pre-Qualified & Pre-Approved
What Does Prequalified Mean?
Mortgage prequalification is your first glimpse into how much home you can afford. It's based on a self-reported review of your finances without a deep dive into your credit history.
Getting prequalified is straightforward. It often requires a brief conversation with a mortgage lender or a quick online application.
Impact on Credit Score
One common concern is whether getting prequalified affects your credit score. In most cases, it does not, as it typically involves a soft credit check or no credit check.
This makes prequalification a risk-free way to estimate how much home you can afford.
What Does Preapproved Mean?
Preapproval is the next level in securing your next mortgage loan. Unlike prequalification, preapproval involves verifying your financial information and conducting a credit check.
This process is a stronger sign to sellers that you're ready to buy, making your offer more attractive.
The Importance of the Preapproval Letter
A preapproval letter is a powerful tool in the homebuying process. It indicates to sellers that a lender backs your offer, significantly boosting your credibility and strength as a buyer.
Key Differences Between Prequalified & Preapproved
The main differences lie in how detailed the review is and how serious you are as a buyer. Review the chart below.
Prequalified vs. Preapproved
Which Option Is Right For You?
Choosing between getting prequalified and preapproved depends on how ready you are to purchase a home. If you're starting to explore, prequalification can help set your budget.
If you're serious about buying in the next six months, a preapproval letter will make your offers more competitive.
Special Considerations For Buyers
Consider your timeline and the current housing market. In a competitive market, preapproval allows borrowers to close on a home more quickly, offering an edge in a competitive market. Additionally, most sellers will be more willing to negotiate with preapproved buyers.
What Information Do You Need to Start?
When you're ready to take the step towards a new home, you'll need:
Connect with FSB Mortgage
Ready to move forward? FSB's Mortgage team is here to guide you through the homebuying process.
Choose between FSB's online application or this quick inquiry form.
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