Prequalification and preapproval are two very different things – but if you’re buying a home, you need to know which is better and what will help you most, particularly if you are a first time buyer.
What is Prequalification?
During the prequalification process, you’ll find out how much a lender may be willing to let you borrow.
You won’t have to go through a credit check during prequalification. You’ll just need to discuss your current financial circumstances with a lender, including your assets, your income and your debt. Once you’ve given the lender an overview of your financial circumstances, they’ll tell you approximately how much money you may qualify to borrow if your circumstances do not change.
What is Preapproval?
Loan preapproval is different from prequalification in that you must verify your financial circumstances with the lender. You’ll go through a credit check, and you will be asked to bring in pay stubs, tax returns, and other documentation that helps a lender verify that you are telling the truth about your financial circumstances.
The lender will preapprove you for a specific amount of money, and as long as your financial circumstances do not change by the time you officially accept the terms of the loan, it’s safe to assume that you’ll qualify for the same amount when you’re ready to buy.
Which is Better?
Sellers can take your offer more seriously if a lender has preapproved you. A preapproval shows sellers that you actually qualify to buy the home, and it can give you an edge when other people are also making offers.
Are You Buying a Home in Aspen or the Surrounding Communities?
If you’re buying your first home in Aspen or the surrounding communities, we can help. Call us at 970-429-8275 or get in touch with us online to tell us what you need so we can begin searching right away.
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