Discover why a home loan pre-approval is important to have when making an offer on a home and how it differs from prequalification.

When you’re shopping for a home, the last thing you—or the seller—wants is for the deal to fall apart because you can’t get a home loan to cover the purchase. This is why many sellers and realtors are now asking buyers to get preapproved for a mortgage before making an offer on a home. Learn about the differences between prequalification and pre-approval, and why pre-approval gives you an advantage as a homebuyer.

What happens during a mortgage prequalification?

Prequalification is useful in the initial steps of the homebuying process when you need to establish how much you can afford to pay for a house. A lender will use information you provide about income, bank accounts and your planned down payment along with a credit check to estimate how much you qualify to borrow on a mortgage, as well as what your mortgage rates might be.

Prequalification is a fast process, often done in less than an hour.

What happens during a mortgage pre-approval?

Pre-approval is a more thorough process that determines your creditworthiness and how much a lender will actually loan you. You’ll provide the lender with documentation regarding your income, bank statements and tax returns from the last two years, along with how much you plan to spend on a down payment. The lender will do a credit check and review your documents.

During the pre-approval process, a lender may ask questions to determine your financial stability. For instance, they may want to know if you’re involved in any lawsuits that might result in a judgment against you, which could potentially require you to pay fees or restitution.

The entire pre-approval process usually takes 7 to 10 days.

How long does mortgage pre-approval last?

When you’re pre-approved, the lender will provide a letter offering to lend you a certain amount. The offer is good for 90 days. If you don’t find a house within 90 days you can have the pre-approval renewed, although you may have to provide updated documentation.

Mortgage pre-approval isn’t a guarantee

Pre-approval isn’t a guarantee that a lender will make a loan. They don’t make guarantees because a borrower’s financial situation could change during the 90 days that the offer is good for. However, if a borrower’s finances remain steady during the pre-approval process the loan will most likely be approved.

Why mortgage pre-approval is so important

When you make an offer on a home, a lender’s pre-approval letter gives the seller confidence that you can see the deal through to closing. It removes doubt about your ability to get financing. In a competitive market where home sellers get multiple offers, a pre-approval letter can give you an advantage as a buyer.

Get pre-approved for a home loan

At Consumers, we offer many kinds of home loans that can help you get into the home of your dreams. If you’re ready to buy a home, consider starting the mortgage pre-approval process with Consumers.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.