The Difference Between Private Mortgage Pre-Qualification and Preapproval
There are several steps to take when securing a private mortgage loan. Still, the two most important are pre-qualification and preapproval. Both give you an estimate of how much you’ll be able to borrow, but they do so in different ways. Both apply to fix and flip multi-family and commercial hard money loans. Here’s a quick rundown of the difference between the two:
Private Mortgage pre-qualification is the first step in estimating how much you’ll be able to borrow. When you’re pre-qualified, we look at a few factors. That includes your employment history, salary, debts, and credit score—and estimate how much money you can borrow. Importantly, being pre-qualified does not guarantee you’ll get the loan; it’s simply an estimate based on the information you provide.
Does Prequalification Impact Credit Score?
In most cases, it is considered a soft pull and won’t affect your credit score. However, this will vary depending on the lender, so it is best to check directly with your private mortgage provider. Generally, it is a good idea to only apply for one mortgage at a time. It may hurt your credit score.
How Long is a Mortgage Loan Pre-Qualification Process?
Pre-qualification generally takes around 2-3 days. However, the time required to complete your pre-qualification will depend on whether you’re working with a mortgage broker or a large lender. In that case, the pre-qualification process is likely faster than if you are working with a private mortgage lender like us.
What Could Make It Take Longer?
Suppose you have any significant financial challenges, such as a high level of debt or poor credit history. In that case, it is a good idea to be prepared for the pre-qualification process to take longer. However, with adequate preparation and working closely with your mortgage provider, you can speed up the pre-qualification process and minimize potential delays.
Private mortgage preapproval is a bit more involved. In addition to looking at your employment history, salary, debts, and credit score, we will also pull your credit report and verify your information. Once complete, we’ll give you a letter indicating how much we will lend you. Unlike pre-qualification, loan preapproval means that you’re almost sure to get the money as long as your financial situation stays the same before closing.
Can I be denied a private mortgage after being pre-approved?
There is no yes or no answer to this question. Numerous factors for loan denial are complex and vary from one situation to the next. Some key factors we will consider when reevaluating your application include your credit score, income, debt levels, and overall financial situation.
How To Avoid Denial After Preapproval
To ensure you have no issues, stay up-to-date on your credit score. Review your credit report regularly and take steps to address any issues. Additionally, don’t take out new loans or open new credit cards. These changes can affect your overall debt-to-income ratio and credit scores and put your mortgage application at risk.
What is a Good Credit Score For Pre-Qualification and Preapproval?
Generally, banks consider a good credit score for buying a house in the 640-760 or higher range. However, we’re not concerned with your credit score. Instead of credit, we base our approvals on the After-Repair-Value and deal potential.
Although credit won’t slow you down, we do look at finances. Approval may depend on paying down high debt levels, making all your monthly payments on time, and avoiding any major adverse financial events, such as bankruptcy or foreclosure.
It All Comes Down to Your Needs
So, which one is better? That depends on your needs. If you want a ballpark estimate of how much you can expect to borrow, then mortgage pre-qualification will suffice. However, if you want to know exactly how much money you’ll have to work with, then private mortgage preapproval is the way to go. We can even provide your approximate interest rate and discount point options.
Get Pre-Qualified and Pre-Approved Now For A Hard Money Loan
We’re the right private lender in Dallas for your private money lending needs. We work with you throughout every step of the pre-qualification process. Whether you are looking for a fix, flip, or rental property, DFW Investor Lending is here.
Complete our simple online application to get started with a pre-approved private mortgage loan. We’ll work with you to determine the right solution for your needs and will help you secure the financing you need to achieve your real estate goals. So why wait? Get started today with DFW Investor Lending, the #1 hard money lender in Dallas, Texas!