Yesterday we took a look at prequalification, and the ins and outs of what that is all about. Today we’ll look at preapproval, which is a different process.

Preapproval: a stronger option

Preapproval is a stronger option than prequalification. Preapproval involves a credit check (and that can affect your credit score), so you know exactly how much the home mortgage lender will give you, and at what interest rate. Often, the home loan officer will give you a preapproval letter that you can take with you to show realtors and homesellers that you are serious. For the more upscale and pricey homes, this is a necessity.

But because preapproval requires a credit check, you should wait until you have shopped around and found the mortgage lender you want to use. If you get preapproval at all possible lenders, then your credit score will start to take a noticeable hit. The best thing to do is check your own credit history, and then shop around for mortgage lenders through prequalification. Then, when you find one you want and narrow down your home choices, pick one home mortgage lender and get your preapproval. It will take more time than prequalification, but it will save time later when it is time to arrange financing for your new home.

Other things considered during the preapproval process: employment verification, verification of your down payment funding, any other aspects of your financial situation, such as debt load.

Tags: credit report, home mortgage lender, home mortgage, finances,
home loan, credit score, reapproval letter