Pre-Qualify / Pre-Approve

What does pre-qualify/pre-approve mean and why should I do it?

Pre-Qualify

You tell your lender basic financial information-Income, debt (car payments, student loans, etc. Your lender then gives you an estimate of what price house you will be able to afford. Advantage- You don't waste time looking at houses you can't afford OR settle for a particular house when you could have afforded more.

Pre-Approve

Provide your lender with proof of income and debts- Check stubs, W-2s or 1099s, information for them to verify car loans, etc. Your lender can then actually approve you for a loan up to a certain amount. This has the same advantage as pre-qualification but more importantly, if there are two offers on the same property at the same time, the pre-approved buyer has an advantage over the non- pre-approved buyer.