Ready to Buy? Get Pre-Qualilfied and Pre-Approved for a Home Loan

By John L. Fischer, Personal Finance Writer   

home loan pre approve

If you're in the market to buy a home, it pays to know the ins and outs of both pre-qualified and pre-approved loans. Being pre-qualified and pre-approved for a home loan can speed up the home-buying process.

Home-buying tip #1: Pre-qualified vs. pre-approved; there is a difference

Loan pre-qualification doesn't include a credit report analysis; a pre-approved home loan does.

Think of pre-qualifying for a home loan like putting "a toe in the water." You get an idea of what to expect without having to commit to anything.

To get a pre-approved home loan, though, you have to get more directly involved. It's more like jumping in the water and swimming around.

To get home loan pre-qualified, you can work with a lender or handle things yourself. Remember, being "pre-qualified" ONLY means you can borrow money for a home loan — nothing more.  

You can ONLY get a home loan pre-approved through a lender or mortgage broker.  This is especially important if you have bad credit and need to get a home loan. "Pre-approved" means that money lenders think you'll repay your loan.

Home-buying tip #2: How to get a "pre-qualified letter"

Test the home-buying waters, and make time to answer these questions:

  • What kind of home do I want? (Colonial, cape, condo …?)

  • How much can I afford to pay? (What are you paying now?)

  • What type of loan do I need? (A fixed-rate mortgage? An adjustable-rate mortgage?)

  • How much can I afford to put down? (This is your estimated down payment.)

From there, you can get a pre-qualified letter (some banks will even pre-qualify you online) that shows both lenders and sellers you're ready to buy.

Home-buying tip #3: How to get pre-approved

You need an official mortgage application; that includes the following:

  • Your credit report. Lenders need your whole credit history.

  • Your annual income numbers. This helps determine your mortgage payments.

  • Employment verification. W-2 forms and pay stubs prove that you're working.

  • Bank records and credit card statements.  These can provide a track record of on-time payments.