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Pre-qualified means that you have verbally spoken with a lender and have provided estimated information regarding your credit and income. As a result the lender has said you qualify for a certain price range. Be aware that surprises could come about when the information is actually verified.
Pre-approval means that you have given your lender your tax returns(W2's), pay stubs, bank statements and your credit has been checked. At this point your lender will run your file through an electronic underwriting program and you will receive a full loan approval subject to the appraisal of your property. This pre-approval puts you in the best possible position when making an offer.
Your credit history is the ultimate factor in determining what programs you qualify for. The better your credit history, the higher your FICO score will be, hence the more loan options you will have.
A good rule of thumb is for your housing expense to be no more than 1/3 of your gross income. Click the blue button to get more home buying advice..