Mortgage Pre-Approval and Pre-Qualification, by Matt Stevens
If you are confused about these two concepts you are not alone. Many people in the UK looking to get the best mortgage for their dream house, have questions about Mortgage Pre-approval and Mortgage Pre-qualification, how they work and how they can help you to get a mortgage deal. In this guide, you will learn the difference between these two concepts, everything about the processes involved and the steps to take to successfully complete them.
What's the Difference?
Mortgage pre-approval and pre-qualification have some similarities even in what they are called, and this can cause some confusion. Despite how similar they look these concepts are not the same nor do they have the same value for you as a mortgage seeker.
The most important difference between pre-approval and pre-qualification is how strong they are in helping you secure a mortgage deal. While both provide an estimation of how much you can afford, pre-approval is a stronger proof of the amount you can afford under your current financial circumstances. This is due to the checks that lenders need to conduct on your financial information and credit history.
What is better: Pre-Approval or Pre-Qualification?
In terms of helping you to get a mortgage deal, pre-approval is far better than pre-qualification, getting a pre-approval means that you have been through a process that requires an excruciating paperwork process which almost certifies you as a buyer. This makes you look better in front of both home sellers and mortgage providers.
How does Pre-Qualification Work?
Pre-qualification is considered the first step towards the process of getting a mortgage and gives you a rough estimate of how much you can borrow. It is a quick process that can be completed both online and over the phone, as it only requires the lender to generate an overall financial picture of the applicant or applicants.
Does Pre-Qualification Guarantee a Mortgage?
Pre-qualification doesn’t guarantee you a mortgage. This is because it is not always accurate as your credit history is not analysed in detail. Therefore, it is not a solid reference for mortgage lenders.
How Long does Pre-Qualification for a Mortgage Last?
Economic changes can happen very fast and as a consequence, your financial status can change too. This is why pre-qualification usually lasts between 60 and 90 days (depending on the lender). So you should ideally complete this process only when you are ready to start the buying process to avoid having to complete this process again.
How to Get Mortgage Pre-Qualification: The Process
The pre-qualification process is usually straightforward, even if it may change from one lender to another, in general the steps are as follows:
First, they will ask you some basic information about your income, expenses, the money you have saved so far and how much you want to borrow, in order to have an initial picture of your current financial situation.
Secondly, your potential lenders may also run a soft credit score inquiry that doesn't negatively impact your credit score.
Finally, the lender will pre qualify you for different types of mortgages and will also provide a mortgage amount estimation on the back of the information they now have about your financial status. Some lenders may even send you a pre-qualification letter. This is useful to show potential sellers that you are likely to get a mortgage to buy the house you’d like to apply for.
How does Pre-Approval Work?
Pre-approval requires more work from lenders and also from you. We will now describe the most common questions that usually arise about pre-approval, and also detail the process to get pre-approved.
Is a Mortgage Guaranteed with Pre-Approval?
Despite pre-approval being a more solid indicator of your eligibility for a mortgage, it's not a guarantee that you'll successfully get the loan. In fact, no matter what type of approval you get, it is never guaranteed that your mortgage will be approved.
How Long Does a Mortgage Pre-approval Last?
Your financial circumstances may change due to many factors, and therefore lenders have to limit the time in which a pre-approval is valid. As happens with pre-qualification, most lenders won’t extend pre-approval beyond 90 days.
The Mortgage Pre-Approval Process
The mortgage pre-approval process is more complex than pre-qualification. When you go through this process you are actually submitting a mortgage application, and this means a more in-depth analysis of your financial situation will be conducted.
First, the lender will gather information about the applicants, this includes personal information about you, where your income level is at, assets you have that can help you keep up with payments if circumstances change in the future, and finally any outstanding loans and other debts that you may have.
The second step consists of running a credit score check on you, and this time it will be a hard check that can potentially affect your credit score. This is why it is a very good idea to prepare for the pre-approval process in advance, for example, gathering all the information lenders will require and working on improving your credit score.
Finally, once the lender processes all the information, they will make a decision, which if positive, will mean that you’ll soon get a pre-approval letter. With this letter, you can improve your chances to get your dream home, as it offers solid proof for estate agents and sellers of your eligibility criteria for a mortgage. However, even if you get pre-approval from one lender, it doesn’t mean that you are getting the best possible deal. It would be wise to compare multiple lenders to make sure you are committing financially to the best possible option.
Online mortgage brokers can help you successfully complete this process and can also get the best deal for you, making the entire experience far easier. Our friendly team here at The Mortgage Genie has access to more than 90 lenders and will assist you in each step of the process. The best advice and the best mortgage deal is just one click away, just fill in this no-hassle form to get a personalised quote.