Mortgage 101

Prequalification vs. Pre-approval

Prequalification: A mortgage loan prequalification is simply an estimate of how much you can afford to purchase a house and how much a lender may be willing to lend you.  You should always start with the prequalification process before you start the home purchasing process.  You would sit down with a lender and provide the information needed such as income, assets, debts and potential down payment.  This will allow the lender to give you a written estimate of how much you will be able to afford to pay for a monthly mortgage. There is NO COST involved and no commitment on either side to get a prequalification letter.  This process helps you to figure out if buying a home is possible and what your price range would possibly be.

Pre-approval: To get a pre-approval you must actually provide documentation of your income, debt and assets.  You will fill out an application and the lender will run a credit check and will work to verify your financial information and employment. Once this is complete you will receive a pre-approval letter.  With this pre-approval letter you will be able to start the home shopping process. Most realtors will not begin showing you homes without a pre-approval letter.  

It is important to understand, however, that even a pre-approval is not a guarantee that you will be approved for a mortgage loan.  The funding will only be given when the property appraisal, title search and other verifications check out on the home you have chosen to purchase.  A pre-approval is not binding.  You can still choose to obtain a mortgage from a different lender.


Appraisal: An appraisal is an estimate of a home’s value provided by a professional appraiser. The appraisal will determine how much the lender would be willing to loan you.  

Federal law entitles you to a copy of the appraisal.  If the appraisal comes in low, you can ask the lender to do a new appraisal if you can show that the appraiser missed a significant feature of the home or did not consider a recent comparable sale at a higher price.

An appraisal is NOT the same thing as a home inspection.  An appraiser will look at the condition of the home and point out any major problems, this however does not replace a home inspection. You should always have a professional home inspector make a comprehensive inspection before finalizing the purchase of your home.