Getting pre-qualified is not the same as getting pre-approved when applying for a mortgage loan.

Getting pre-approved means that you have spoken with a loan officer and provided the loan officer all of the documentation that he requested to get a loan approval. Generally speaking, the loan officer will verify your documentation and run your information through the Automated Underwriting Engine (referred to as Desktop Underwriter or DU) and gotten an approval.

Getting pre-qualified means that you have spoken to a loan officer and told him your income, asset and credit score information and he has essentially taken your word that everything you said to be true is indeed true. You have not “proven” any of the items to him by providing documentation.

Getting pre-qualified it good, getting pre-approved is better because it lets you have a much better idea about the details of your loan transaction when the time comes to finalize the details of your loan.

Just a few reasons that getting pre-approved is a great idea before starting the home buying process:

You will know based on your income and current debts how much of a house you can buy.

When shopping for a house, it is a good idea to have a range of homes that you can confidently say you can afford. If after speaking with a loan officer, your find out your range is $150,000 to $175,000 then you know even if your ideal home you will find will be $150,000 – you can stretch up to $175,000 and still be able to afford the house.

You will know what your approximate monthly mortgage payment will be.

In the process of getting pre-approved, you can find out what your monthly mortgage payment will be (approximately) including principal, interest, insurance and taxes — and even mortgage insurance if applicable.  If you got a range from your loan officer, you can even break it down to terms such as “this house will cost me $125 more per month than the other one” — which is easier for some people to make cost/benefit choices when put into monthly payment terms rather than total loan amount terms.

You will have a good idea of how much money you will need to come to close with.

Depending on what loan program  you choose when working with your loan officer, you may be able to bring zero money to close or may want to bring 20% to close. The major factors to consider that determine how much you will want to bring to close include what loan program you will be qualifying for and what role mortgage insurance plays in your selection.  This is an area that an expert loan officer can help you with making the best decision for your situation.

Getting pre-approved or pre-qualified take about the same amount of time – the difference is in getting your documentation together. But regardless of whether you get pre-approved or pre-qualified – speaking to a lender before you begin your home search is an excellent idea.

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