Mortgage Pre-Qualification
Once you have determined how much you can spend each month on your new home, you can determine the maximum sales price you can afford. The maximum sales price you can afford will vary depending on your income and the size of your down payment. A mortgage pre-qualification will give you an estimate of the amount of money you can borrow to purchase a home along with an estimate of your monthly payment.
Mortgage Pre-Approval
A mortgage pre-approval is not the same as pre-qualification. A pre-approval means you have completed the application process and have a written commitment from the lender to give you a mortgage loan for a certain amount.
Pre-approval gives you an advantage when dealing with a seller since you already have financing in place. Typically, the home remains under contract while the buyer obtains financing. The seller will be able to complete the transaction sooner to a pre-approved buyer.
The disadvantages of pre-approval are that you may have to pay an application fee and complete the necessary forms verifying your employment, income and credit. If you later decide not to use the lender who issued the pre-approval, you will forfeit any application fee and have to go through the process again.