If you’re thinking about buying a house, you’ve likely heard the terms “prequalification” and “preapproval” thrown around. They might sound similar, but they play different roles in the homebuying process. Understanding these steps can help you feel more confident as you navigate this exciting (and sometimes overwhelming) journey.

Prequalification: Your First Step

Imagine you’re starting to look at homes and want to know if you can afford that dream place you’ve been eyeing. This is where prequalification comes in. It’s a quick, informal way to get an estimate of how much you might be able to borrow. You provide basic financial information—like your income, debts, and savings—and the lender gives you an estimate. No paperwork or commitment needed.

Key features of prequalification:
– Quick and easy:  No need to submit official documents.
– Initial estimate:  Gives you a ballpark range of what you can afford.
– Non-binding:  You’re not committing to anything with the lender.

Preapproval: A Step Closer to Buying

Now, let’s say you’ve found a house you love, and you’re ready to get serious. This is when you want to get preapproved. Preapproval is a more in-depth process that requires you to submit documentation—like pay stubs, tax returns, and credit reports. The lender does a thorough review and gives you a letter stating how much they’re willing to lend you, assuming nothing major changes with your finances.

Download the checklist.

Key features of preapproval:
– Detailed review:  The lender verifies your financial information.
– Stronger offer:  A preapproval letter shows sellers you’re a serious buyer.
– More accurate:  Gives a clearer picture of your actual loan potential.

Example: You’ve been prequalified for up to $180,000 and now find a home listed at $170,000 that you want to make an offer on. You go through the preapproval process, providing your financial documents. The lender approves you for a $170,000 loan. With a preapproval letter in hand, your offer looks stronger to the seller, putting you in a better position to close the deal.

Why Both Steps Matter

Prequalification and preapproval aren’t required, but they can be helpful in making your homebuying journey smoother. Prequalification gives you a sense of what you might be able to afford, while preapproval provides a solid foundation for making an offer. For many sellers, a preapproval letter can be a deciding factor when they’re choosing between multiple buyers.

Typically, prequalification is the first step—it helps you set realistic expectations early in the process. Once you’re ready to start making offers, preapproval becomes essential.

If you’re just beginning your home search, prequalification can help ease the nerves. It’s like testing the waters without diving in headfirst. But when you’re ready to commit, preapproval gives you that extra peace of mind—and makes you look like a confident buyer to sellers.

Getting Prequalified and Preapproved with Minster Bank

At Minster Bank, we understand that buying a home is a big deal, especially for first-time buyers. We’re here to walk you through every step of the process—from prequalification to preapproval—and help make your dream of homeownership a reality. Let’s get started today! Contact Us.  View Current Rates.