If you’re by chance have ever taken a home loan from a particular bank or looking to avail one in the near future, you have probably come across the terms pre-approval and pre-qualification. Most people think that this is one and the same thing, with the only difference being the choice of terminology. While this is partly the right answer as pre-qualification and pre-approval share a lot of similarities, there are some differences. Looking ahead to the point where you wish to avail a home loan to purchase land or a house, having a pre-qualification and pre-approval will certainly give you the upper hand. Getting to the point, what is the difference between the two, or are they the same thing?
To help you understand the difference between the two, let’s make it simpler for you to understand and first discuss the similarities between pre-qualification and pre-approval. The similarities are listed below:
There is not much difference between the two to be honest.
In the case of a pre-approval, the bank will make an in-depth or a comprehensive verification of the customer’s credit score, income over the last few years, annual income, monthly net income, debt-to-income ratio and so on. This process is not done verbally and isn’t based on the details verbally provided by the customer, here the bank executive will do a thorough background check of the customer’s details before giving an approval.
Getting a preapproval does not guarantee you getting a loan approval, and before an approval comes through, this is what you shouldn’t do after a pre-approval or pre-qualification.
To sum it all up, the bank is not obligated to give you a loan approval even after you get a pre-approval or a pre-qualification letter. Yes, you certainly have the upper hand, but the bank - based on numerous factors, some of which are already mentioned above - has every right to not approve your loan application.
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