Buying a Home - First Community Federal Credit Union

Understand Mortgage Preapproval and Prequalification

Do you know the difference between getting prequalified vs. getting preapproved for a loan? Is one better than the other or carry more weight? Know how to use both.

Prequalification means you have given the loan officer information about your income, debts, and savings. This allows the lender to conduct a quick analysis to ensure you have sufficient assets to purchase a house. The process also helps determine how much money you are eligible to borrow before applying for a loan. That helps you know what price range you can shop for, too.

Preapproval, on the other hand, is when the lender reviews your application and credit report through the underwriting process. When an underwriter examines and approves your application, this typically carries more weight than a prequalification opinion.

Sometimes, an underwriter pre-approves a loan with conditions, but without sufficient documentation on employment, income, cash assets, property appraisal, and more. These conditions mean, then, that preapproval is no more binding than prequalification.

While prequalification doesn't bear as much authority as preapproval, the prequalification letter can be issued quickly--perhaps to satisfy a prospective seller while the loan officer gathers additional financial documentation such as tax returns.

Contact First Community FCU’s Mortgage Loan Department via email or by calling (269) 382-9845 to help you sort through the uses of both prequalification and preapproval based on your situation.