Pre-Approval vs. Pre-qualification | Brian Scott Cohen

What is the difference between preapproval and prequalification in real estate? NYC mortgage lender Brian Scott Cohen has the answers. Learn more here.

Pre-approval

Preapproval will give you a clear idea of the homes that are in your price range so you can narrow down your search.

Getting preapproved does not guarantee you will be qualified for a mortgage when you apply. It is a conditional agreement that your mortgage application may be granted by a lender that you can qualify for financing on homes within a specific range. When you’re officially pre-approved it encourages sellers to move forward with your offer given that you have already proven you can afford the loan to buy the home.

To get preapproved, your lender will ask for a series of documents to examine your financial status. They include your credit score*, debt-to-income ratio (DTI), and employment history. DTI is determined by taking the total of the borrower’s monthly debt payments, divided by their gross monthly income.

Additionally, if you have additional forms of personal debt such as student loans or car payments those will be factors in your loan amount.

Prequalification

Now let’s talk about prequalification. Prequalification describes the lender’s ability to grant a loan based on the borrower’s documentation. The document usually details the borrower’s financial status and is used to manage the terms of the mortgage and the options the borrower can afford.

It provides all parties with assurance that if a loan moves forward, the borrower is creditworthy and can pay back the loan. Just note that it does not provide full assurance that a loan will be approved – that’s why preapprovals are super important.

In short, when you contact me it’s always helpful to have an idea of your credit score and salary. I’ll guide you accordingly and advise you apply to get pre-approved, so sellers take your offers seriously.

Equal Housing Lender, Brian Scott Cohen NMLS ID: 410025; OriginPoint LLC fka Guaranteed Rate Affinity, LLC (“OriginPoint”) NMLS 1598647; For licensing information visit nmlsconsumeraccess.org. Operating in the state of New York as OriginPoint LLC fka GR Affinity, LLC. Operating in the state of California as OriginPoint Lending LLC fka Guaranteed Rate Affinity, LLC.