Home Loan Pre Approval vs Pre Qualification

January 31, 2020 | Mission Fed

Woman enjoying her coffee in her home while talking to her dog.

The anticipation of buying a new home can cause you to feel both excited and simultaneously overwhelmed. Although your Pinterest-inspired dreams of wooden floorboards, bay windows, and an open plan kitchen are ready to become a reality; there are some logistical and administrative mountains you still have to climb.

In order to get some insight into the kind of price range you can afford, you may want to get a pre qualification. The pre qualification process does not warrant any verification, as it’s an informal process, but it does give you some idea about what to expect. The pre approval, however, is where the lender allows you to borrow up to a certain amount of money with a specific interest rate, based on formal verification of documents, assets, income, credit score, savings and other requirements.

Very often these terms can be confusing, especially for first-time homebuyers who want a home loan. If you are in this situation and you want to learn more about the loan application process, Mission Fed can help. Read on to learn about the difference between them, and to get a jumpstart on your home loan process.

Simplified Steps to Home Ownership

To simplify the entire process of becoming a homeowner, here are the general steps you will need to take:

  • Mortgage Pre-qualification – Buyers can seek consultation on the mortgage rates and offers that they might qualify for. This will take into account your credit score, credit history, income, and savings. With a pre-qualification mortgage, you can be better informed of your home buying potential.
  • Mortgage Pre-approval – It is important to receive official pre-approval on your mortgage before you start browsing through homes. It would be foolish to find the perfect home, but then not be approved to finance it!
  • Securing a loan – Once pre-approved your mortgage loan can be secured either with a credit union, or a bank.
  • Working with realtors to view properties – Work with your local San Diego realtor to tour properties that you would be eligible for, based on your mortgage pre-approval.
  • Making an offer – When you find a home that fits your needs, determine the offer price that you will present. Be quick about it, houses in San Diego move fast and aren’t on the market for long.
  • Negotiation – The offer is approved or refused by the current homeowner. If refused, they can counter offer, or decline altogether (though, most counter offer).
  • Appraisal - Commission a property appraisal to confirm that all details of the house are in order. Home appraisers generally cost a few hundred dollars, but will confirm that the value of the home is reasonably correct. This will give you a better idea of the real estate value.
  • Escrow – A third party facilitates the transfer of funds to close the deal. Congratulations, you are now officially a homeowner!

What is Pre Approval vs. Pre Qualification?

The process of pre-qualification allows you to get an informal assessment of your financial situation and gauge your potential loan options. For anyone who is unsure about their financial suitability to purchase a home, or uncertain of their mortgage options; a pre-qualification consultant can help you find the mortgage that you qualify for.

In order to seek pre-qualification, you need to present the following information:

  • Your credit history
  • Your financial status
  • Your current income
  • Your buying history

With this information, your housing lender can make a fairly accurate estimation of the loan you might be eligible for. They will sound out your price bracket and budget restrictions, and can even assist you with calculating an appropriate monthly payment rate. The point of the pre-qualification,is to help give you a broader picture of your financial affairs, which will assist you in the decision-making process.

What does Pre-Approved Mean for a Mortgage?

The mortgage pre-approval process is the next step. While pre-qualification gives you a rough idea of your financial parameters, pre-approval actually forms a relationship with a mortgage company, allowing you to get a loan confidently.

There is nothing worse than the disappointment of surrendering a dream home due to a mortgage application falling through. Being able to guarantee a mortgage acceptance upfront, before looking at properties, allows you to approach the process with greater ease and confidence. From a realtor’s perspective, having a letter of pre-approval demonstrates your sincerity as a buyer and allows your interest in a property to be taken seriously.

The process of pre-approval digs a little deeper into your financial history than the pre-qualification process. In this instance, you will fill out a full mortgage application in order to create a loan and payment scheme that suits your needs. While written pre-approval may be granted, this should not be mistaken for underwriting (which is the formal and final process of granting the loan).

Asking the Right Questions

No one person has the same experience when buying a home. It is important to ask questions in order to find help from housing lenders and professionals who can guide you in this momentous decision. Talk to realtors, credit unions and find a trustworthy mortgage broker to help personalize your experience, and answer any questions you have. The Department of Housing and Urban Development has a bounty of resources across the U.S. that can help you with these critical decisions.

Making the Call

Over 12 million Californians are members of credit unions, and those located in California contain total assets of over $206 billion, proving their status as an invaluable solution for financial services.

If you are interested in staying local, talk to your Mission Fed lender about the pre-approval and pre-qualification process. To find out how to get approved for a home loan, visit our website or contact a housing lender from Mission Fed today.

The content provided is intended for informational purposes. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article does not constitute endorsement, control or warranty by Mission Federal Credit Union.

Sources:

SDAR, Lender Mediated Properties Report, http://sdar.stats.10kresearch.com/docs/fss/x/report?src=page

The Department of Housing and Urban Development, Finding a Housing Counsellor, https://www.hudexchange.info/programs/housing-counseling/customer-service-feedback/

Credit Unions Online. California Credit Unions. https://www.creditunionsonline.com/california-credit-unions.html

Virtual Appointment

Open an account
with Virtual Appointment

Schedule Appointment
Mission Fed

Mission Fed

More Blog Posts

Family Vacations On a Budget

photo of a father and son in a camping tent

Planning a family vacation on a budget? Did you know that when you book your trip and how you pay...

There are many ways to save money while planning a family vacation—and Mission Fed is here to help you! Whether it’s using the smart features of your Savings Accounts to budget for your getaway or using your free Mission Rewards points to book your flight, Mission Fed is...

Credit Card Points Can Add Up Fast with the Right Card

Graphic of Earn Points and Save with a Mission Fed Platinum Credit Card info graphic

If you’re looking to apply for your first Credit Card, your next Credit Card, a backup Credit Card...

If you’re looking to apply for your first Credit Card, your next Credit Card, a backup Credit Card or you want to transfer your balance from one card to another, Mission Fed has the right Credit Card for you. With the Mission Fed Platinum Credit Card, you...

Mission Fed Nonprofit Partners

Smiling woman doing community service in front of men unpacking canned food into boxes.

Mission Fed is proud to work with nonprofit partners to make a difference and give back to the...

At Mission Federal Credit Union, we’re pleased to partner with local nonprofits to help give back to the San Diego community by supporting local youth and helping to provide financial education. Our community mission is to improve financial literacy...

5 Reasons You Need a Checking Account

Photo of a happy couple using their Mission Fed checking account.

Are you wondering about the benefits of opening a checking account? There are a number of ways that...

Do you know all the benefits of opening a checking account? Using a checking account not only helps you keep track of your spending and payments, but it can also give you access to your money more easily while keeping it safe and offer you convenient tools, too. Learn how...

Branch/ATM Locator

Search for Mission Fed Branches and ATMs, or 30,000 CO-OP Network ATMs Nationwide