Pre Approved Vs Pre Qualified Home Loan: All You Need To Know
In case you have taken a home loan or are looking for the same you might have come across two similar-sounding different terms: pre-approval and prequalification. These two terms are often considered to be similar while they are different. If you are looking for a home loan it is important to understand the difference between the two.
Similarities between the two
Both pre-qualification and pre-approval can offer you an upper hand if you are looking for a home loan. These two are key steps in the home loan process. These two are the commitments offered by the lender and determine your home loan eligibility. In both, the cases lender takes your financial information to determine if a home loan can be offered. Both pre-qualification and pre-approval can offer you a significant idea about the loan amount you can avail of based on your financial history and capabilities.
Both these terms provide you an edge in the real estate market as it helps you determine your budget and you are able to negotiate with the lender for better terms. In case you select the property, pre-qualification or pre-approval can result in faster disbursal of home loans. Both of these are written commitments from the lender
Differences between the two
The requirements for pre-approval are usually different from pre-qualification depending upon the requirements of a home loan. Between pre-qualification and pre-approval, pre-approval is considerably more accurate as it evaluated your home loan eligibility and undertakes credit appraisal. Pre-qualification is only a basic review of your creditworthiness to determine if you are likely to get a home loan. On the other hand, pre-approval is a more in-depth evaluation wherein the lender offers you’re the amount for which you can take the loan. With pre-approval in your hand, you can determine the budget and use the EMI calculator to determine your EMI for shortlisting your property as it locks in the interest rate.
When you have a pre-approved letter, you only need to present the property documents to verify which reduces the overall loan processing time. However, this pre-approval is an offer from the lender which is valid for a limited period. Pre-qualification also involved evaluation of your financial information and history but it is very limited in nature. However, it is less rigorous as compared to the pre-approval process and also less accurate.
Once you become prequalified you need to undergo a complete review process which is similar to one in the pre-approval process. At the very initial stage of a home, loan pre-qualification can be a good idea to determine whether you should consider buying a property with a home loan or not. Also, getting pre-qualified does not necessarily mean that your loan would be approved. You can choose between pre-approval or pre-qualification depending upon your needs for a home loan. Both of them will offer you an upper hand in getting the home loan to disburse as you finalise the property.
You can go for pre-qualification or pre-approval depending upon your needs. You must keep in mind both these commitments are conditional. It does provide an upper hand but it does not mean that the lender is obliged to give you a loan. In case your financial circumstances or situation alters materially both pre-qualification and pre-approval lapse.
