Prequalification vs Preapproval

Sometimes there is confusion between being pre-qualified for a home loan vs. pre-approved. There is quite a difference.

When you obtain a pre-qualification letter from your home loan provider, that letter simply states that based on your verbal statement that you make “x” amount of money each year and your expenses are”y” each year. With a pre-qualification, your lender has not verified your income, assets, debts, expenses, and credit score or history.

A pre-approval letter is issued by your home loan provider after you have submitted your personal documentation that typically includes the following:

· 2 Years tax returns

· 2 months of pay stubs

· 2 months of bank statements

· Credit report

You should ask your home loan provider what else is required to be fully approved by your lender for a home loan once you have obtained your pre-approval letter. Lenders vary as to the quality of the pre-approval letter and some lenders require additional underwriting conditions.

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