I am often asked about the differences between getting pre-qualified and getting pre-approved for a mortgage.
When you are pre-qualified, the bank asks you a few questions about your income, your job, and your debt. They will run a credit report and check your credit. Then they will make a quick determination if you will qualify for a mortgage and for how much. The process is relatively quick and is always a good idea to do before you start house shopping. Not only will this tell you if you will qualify for a mortgage, but it will tell you how much house you can afford. Banks do not charge a fee to be pre-qualified. They will give you notice in writing that you can show to sellers that you have been pre-qualified for a mortgage sufficient to buy the house you are looking at.
Pre-approval is a much more thorough process but can take up to a month. In order to get pre-approved, the bank will likely charge you an application fee. This fee helps to cover expenses associated with verifying your information and getting you pre-approved. The bank will ask for documentation from you including tax returns, pay stubs, bank statements, proof of other assets such as IRAs, or investment accounts, and possibly a written explanation of anything negative on your credit report. Then the bank will submit everything to their underwriting department which will verify everything you have said and provided them with, and then the bank will make a firm determination if they will lend you the money you need to buy a home. Once complete, the bank will let you know in writing how much they are willing to provide you with for your new mortgage.
When you are pre-approved, this shows a seller that the bank has already verified all of your documentation and income meaning that you are ready to buy this home. As long as nothing has changed with your financial circumstances, and the house appraises for an amount that the bank requires, you are ready to close.
Not only does being pre-approved speed up the process to finance your new home, it also makes you almost as valuable as a cash buyer because you are already approved for your mortgage.
The Key West real estate market is always hot and it's important to make your offer as competitive as possible. When you are pre-approved, the seller knows you have the ability to complete the transaction and every advantage will help you beat out other offers for your new home.