Is being pre-approved for a home loan the same as those credit card pre-approved offers you get in the mail? Or is it the same as actually being approved for the mortgage you need to buy the home you want?
Neither, it turns out. Mortgage pre-approval means exactly what it says: a lender is notifying you that you have preliminary approval for a specific loan amount. They’re also giving you an indication, not a guarantee, of the interest rate you could be eligible for if you continue through the loan underwriting process. A mortgage loan pre-approval means that the lender considers you qualified to borrow a certain amount of money based on the information they have at the time of your pre-approval.
You also shouldn’t confuse a California home mortgage pre-approval that you get from a specific lender based on soft credit inquiries and your stated income with letters you might get in the mail promising pre-approval or a certain loan amount. Those letters are sales tools, not real pre-approval letters.
What are the advantages of being pre-approved for a home loan?
If you’re looking for a home to buy, you can get a firm idea of the amount of mortgage you can afford based on a loan pre-approval. If you have a pre-approval letter, you know that you can narrow down the price range of homes you can afford. You won’t be shopping below your marketability to buy, and you also won’t waste time looking at properties that are out of your price range.
You can also increase your ability to make a successful offer on a house. Few things are more frustrating than finding the right house at the right price, but losing out on the opportunity because you aren’t pre-approved for a home loan. Loan pre-approval is a good step to take when shopping for a home, but there are a few drawbacks. You may be tempted to complete the home loan process with the lender who pre-approved you and not considers working with any other lender. This is one of the primary reasons it’s a great idea to work with an experienced home mortgage professional who can offer you pre-approval opportunities and give you the ability to evaluate and choose which lender and California home loan are right for you.