In most cases a pre-qualification is a written letter from a mortgage lender stating that the borrower is eligible for a home mortgage loan up to a certain loan limit. (ie. Bank of America Home Loans has pre-qualified Johnny Example to buy a home up to $500,000.) A pre-qualification letter is usually created after the borrower shares their information and the mortgage lender will examine their credit report and income documentation. However, the prequalification analysis is only an estimate of the maximum the borrower is qualified for. There is no commitment on behalf of the lender and considerations like mortgage rates and loan programs are subject to change.
In most cases, a mortgage pre-approval is a written letter that includes a loan decision from the underwriting department after a borrower completes the residential loan application. Usually, a borrower can apply for a pre-approved home loan prior to signing a purchase agreement for a home. Many mortgage lenders will also enable the borrower to lock the interest rate at the time the home loan is pre-approved. A pre-approval is a great negotiating tool for home buyers because it lends them credibility and helps the seller make a decision on their perspective offer.
Many first time home buyers prefer FHA mortgage loan options because these loans only require a 3.5% down-payment. For homebuyers with a military background we recommend VA mortgage programs because they require no down-payment. VA home financing is available up to 100% even for first time homebuyers.
Use this Pre-Qualification Mortgage Calculator below to see what home loan makes sense for your needs.
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