Many prospective homebuyers and investors mistakenly conflate the terms “pre-qualification” and “pre-approval”. While both of these terms apply to the process of purchasing property, they are not the same thing. While both are necessary steps in the process of obtaining financing for a home, they each require unique information from potential buyers and involve a different series of steps.
What is Pre-Qualification?
Pre-qualification refers to the preliminary step in the process of purchasing or investing in a piece of property. When an individual applies for pre-qualification, he or she provides basic financial details to a lending institution. These details might include everything from assets and holdings to income and the amount of debt held. Once the information is provided, the lender will offer the prospective borrower an informed estimate of the home loan amount they might be able to receive.
Steps to Successful Pre-Qualification
There is no short-term way to increase the chances of pre-qualification for a mortgage. Buyers who have a lower debt-to-income ratio and who can demonstrate financial stability will be more likely to pre-qualify for a respectable home loan. Aside from that, buyers should just be sure to report all of their financial holdings as accurately as possible. The actual process of getting pre-qualified is quite simple — in fact, it can often be done over the phone or on the Internet and results can be generated in just a matter of minutes.