Difference Between Prequalified and Preapproved
Being prequalified for a mortgage loan means a lender has decided you will likely be approved for up to a certain amount of money, given your current financial status. The lender may have done this by looking at your credit report and other information about you. This is called “verifying” that you qualify for the loan.
On the other hand, being preapproved for a VA loan means that you have provided a full loan application, including income and assets and it has been reviewed and approved by a VA-approved underwriter. This is usually done in about two weeks from submitting an application to the lender.
There are instances where lenders are satisfied with their client’s loan applications but still give them specific conditions and require them to meet certain criteria before they can be fully approved. This is also known as “conditionally approved.”
Being conditionally approved doesn’t guarantee a client’s home loan application to be approved at the end of the process. Only that the lender is willing to let them borrow money if they meet their pending conditions.
What is the VA home loan underwriting process?
- During this process, underwriters assess the risk and exposure of prospective clients. They conduct a strict documents review to ensure the borrower(Veterans) complies with all the requirements. They also have to find out whether the borrower is reliable when it comes to paying back the mortgage on time.
How Do You Prequalify for a VA Home Loan
To start, you can go online and research any programs available to you as a veteran. This could be time-consuming. Your best option is to connect with a Realtor, familiar with assisting veterans and request a recommendation of their preferred VA home loan specialist for you.
These loans are made directly between the VA and lenders. To prequalify for a VA home loan, you must gather your financial documents and have them on hand. You’ll provide your lender with an overview of your financial situation as well as your desired loan. Then, the lender will tell you a tentative loan amount it is willing to issue you.
You need to understand that the success of the prequalification process will be based on the information you provide your lender. Submit the documents needed to prequalify for a mortgage and make sure all the information is accurate.
Your lender may ask for your:
- Bank statements (to show your assets)
- IRS income tax form transcripts (if you’re self-employed)
- Recent W2 forms (to show your income history)
- Recent pay stubs (to show your current earnings)
Gathering all these documents and information before the application process will save you a lot of time.
The Benefit of Being Prequalified for a Mortgage
Being prequalified for a mortgage simply means you move on to the next step which is the preapproval of your home loan. A pre-approved loan means that a lender has looked into your financial situation and determined how much you can afford for a mortgage.
Getting preapproved will save you time by identifying how much money you can afford so that you can narrow down your home search to your budget range. This also means that you’re ready to take the next step toward homeownership.