Transcript: Prequalification versus preapproval
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Smart buyers do their homework. They estimate a price range for a house before they shop. You can do this with a mortgage prequalification or a preapproval.
A free mortgage prequalification lets you know roughly how much you can borrow, based on basic financial data you provide.
There is no fee or obligation and no credit check involved.
A pre-approval involves a more detailed look at your data and is based on a preliminary review of your credit information. It tells a real estate agent and seller that you've been preapproved for a specific loan amount. With a preapproval, there may be a fee for the cost of the credit check.
Because it is based on more detailed information and an actual credit check, a preapproval has greater benefits than a prequalification.
With a preapproval, you'll be able to shop confidently because you have an estimate of how much you may be able to borrow, and your real estate agent will know your approximate price range to search.
Getting preapproved or prequalified can help you estimate your price range.
However, it's important to remember that neither one is a commitment to lend.