We understand how frustrating it can be to search for a home in Austin. Half the battle is learning the key terms and what they mean in regards to Texas real estate. So each week we bring you Key Term Tuesday – our way of helping you decode the industry jargon that keeps you from owning your home search.
This week’s key term Tuesday is another double bonus and focuses on two of the most commonly misunderstood expressions in the mortgage business: Pre-Approved vs Pre-Qualified. These terms have distinctively different meanings and the difference could make or break your deal.
Pre-Qualified for a Mortgage
Being pre-qualified means that you have a non-binding opinion by a loan officer of how much you might be able to borrow buy a home. Interest rate and terms are not locked-in. It is a brief, informal process usually conducted over the phone in which a prospective borrower summarizes his or her employment, income, debt and cash position to a loan officer. No credit check is performed, the prospect does not provide any documentation or paperwork and it is free of charge. Essentially, the loan officer is taking at face value the borrowers’ word about their financial position. With that information, the loan officer usually provides a verbal opinion of how much money the home buyer might expect to borrow. First-time home buyers sometimes seek out a pre-qualification is get a “ball park” idea of how much they might be able to borrow, but it does not guarantee anything.
Pre-Approved for a Mortgage
Being pre-approved means you have a binding, written commitment to loan you a certain amount of money to buy a home. Interest rate and terms are stipulated. The process starts when you submit to a loan officer a written application to obtain a home purchase loan. The lender will order a credit report, determine your FICO score and you’ll need to provide tax returns, bank statements, proof of identity and other documentation as required. Once all of the documentation has been verified, a written commitment letter will be issued. You now are officially pre-approved for the loan stipulated. More importantly, this process allows the seller to be assured that you have the money to complete the purchase. Now you have a leg-up over other buyers who are only pre-qualified.
Looking for an Austin Real Estate Expert?
Our team has a combined 55+ years of experience helping home buyers understand the r. Check out our approach to Buying a Home in Austin to learn more about our team and how we work. Then, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.
Check out Investors Choice Lending – Home to learn how you can get a long-term refinance loan.
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