Prequalification vs. Preapproval

If you’re buying a home for sale in Tampa Bay, you need to know that there are differences between loan prequalification and loan preapproval – but what are they, and why do they matter?

What is Prequalification?

Prequalification is an informal process. You’ll talk to a mortgage lender about how much money you make, your expenses, and your assets – but the lender won’t require you to back up your statements with a paper trail. The lender may say, “Sure, if this is all true, we’ll give you a loan for $X,” but it doesn’t carry any weight with sellers because it’s all based on information you provided the lender without proof.

What is Preapproval?

Preapproval is a more formal process. You’ll show your mortgage lender documentataion that backs up your claims about your income, expenses, and assets. The lender will cross-check and verify everything you’ve said, and it will check your credit scores before making a determination. A prequalification isn’t a guarantee that the lender will give you the money you want to borrow, but it is a step in that direction.