Ever hear the adage of not looking at cars or wedding dresses you can’t afford to save you from heartbreak? The same goes for home buying. It’s best to know how much you can afford before you go searching for that dream home, and even more beneficial to work with a lender that can help give you an accurate picture of your financial situation. Let’s talk about the difference between pre-approval* and pre-qualification and dive a little deeper into one of the most critical steps of the home buying process.
What is a Pre-Approval?
Pre-approval is a mortgage lender’s conditional agreement to lend a specific amount of money to a home buyer under a specified set of terms. Simply put, a pre-approval helps to give you the price range on the home you can afford.
How It Works
When you want to be pre-approved for a home, you begin by filling out a loan application. Loan applications have traditionally been done on paper, but most lenders are now offering an online application in which everything can be submitted digitally. During the application, you will enter your personal information, as well as information about your assets and income. The lender will also pull your credit. All of this information will be verified, and if all looks good, you will be pre-approved for a specific loan amount. Pre-approval doesn’t lock you into the mortgage you’re offered, but offers you a more accurate look at the loan you qualify for.
How We Do It
Coastal Loans takes loan applications online at SimpleLoan.com. SimpleLoan™ is programmed to pre-approve potential borrowers in as little as 8 minutes. You start with creating an account and entering your personal information like your name, where you currently live, and your social security number. You will still need to enter your asset and income information; however, SimpleLoan.com makes things easy by integrating with thousands of banks and employment agencies so you can easily find and submit your bank statements and pay stubs. Once all of this information is submitted, SimpleLoan’s automatic underwriting system (fancy lingo for high-tech fact checker) will review your information, and if all is verified and approved, you will receive a pre-approval. Once you are pre-approved, you can start shopping for your home more confidently knowing how much of a loan you have already been pre-approved for.
Pre-Approval vs. Pre-Qualification
The terms pre-approval and pre-qualification can mistakenly be used interchangeably. But be careful! The two mean very different things. A pre-approval is a thorough and accurate look at your financial situation. The information submitted is detailed enough and verified to tell the lender exactly how much of a loan you can afford.
A pre-qualification takes a more shallow approach when looking at your finances. You only have to submit your debt, income, and assets; from this information, the lender is able to tell you if you qualify and how much you might be able to borrow – not as exact or accurate. It’s best to receive a pre-approval before you start home shopping!
Answers to Your Pre-Approval Questions
Are online mortgage applications like SimpleLoan.com secure?
Submitting important personal information such as your social security number, address, and bank statements online can seem questionable to some. But the entire online process is the most secure way to complete your mortgage application. It’s also the easiest; application developers take the time to make sure each part of the application is easy to use for everyone.
How much does it cost for a pre-approval?
The entire pre-approval process is free! There is no cost associated with being pre-approved.
How long does the application take?
That’s the best part – most mortgage applications are very quick to complete. It takes as little as 8 minutes to complete a loan application on SimpleLoan.com.
With SimpleLoan.com, you get the convenient online benefits of a quick and simple pre-approval and the personal benefits of working with someone one-on-one during the entire mortgage process. Learn more about SimpleLoan.com here.
Why Coastal Loans?
At Coastal Loans we work directly with Holiday Builders to streamline your homebuying process. As your dedicated mortgage lender, we are able to simplify the lines of communication with your home purchase team, resulting in industry leading turn times. Our competitive rates and extensive loan product options allow us more opportunities to help our clients secure their dream home.
Buying a home is one of the most important financial decisions you will make. Understanding mortgages and the home buying process can help make it less stressful, and so can partnering with a mortgage lender you can trust. At Coastal Loans, we’re dedicated to helping home buyers finance their dream home. All information presented is for educational purposes only and not intended as financial advice.
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*“Pre-Approval” means an automated underwriting system approval (conditional approval) based upon credit information supplied by applicant and subject to Coastal Loans, LLC’s review of loan documents. Not all applicants will be approved.