Pre-Qualified vs Pre-Approval vs Buying a Car

Pre-Qualified:  a ballpark idea of how much a bank will loan you so that you can shop within your price range.  Most banks and credit unions will do this over the phone, and your credit history will usually not be checked. A loan officer asks you about your income, assets, debts and projected down payment and then calculates what kind of loan you'd likely qualify for. The process takes just a few minutes.

Pre-Approval:   the lending institution gathers all the information it requires to offer you a loan, and your credit report will be checked; you may be charged a fee for this at the time of the appointment. You'll need to bring some items with you to document your identity and your assets:

· A copy of your most recent bank statements (this includes your daily checking account as well as any money market, savings or other accounts)

· Your most recent W-2 (or entire tax return if you're self-employed)

· Proof of IRAs or savings or retirement accounts and their current balances ( any stocks or mutual funds you own outside of retirement accounts)

· Your driver's license

· The most recent month's paystub(s) from your job

· An application fee (this depends on the lender)

At the end of the pre-approval process, if the bank looks you over and likes what it sees, you'll receive what's called a good faith estimate (GFE), which is a brief document spelling out the likely terms of the loan, including the interest rate, loan type (fixed-rate, adjustable and so on) and closing costs. Don’t believe that any advertised rates on mailers or commercials are guaranteed for you!

A pre-approval is also not a guarantee.  The appraisal, clear title, and appropriate insurance will have to be in place (this happens during the escrow period) before a bank will fund a loan.  In addition, once you receive pre-qualification or pre-approval any large purchases including cars, major appliances, and excessive shopping sprees, loss of a job, change in marital status, or relocation can and will affect your loan qualification. 

Contact us today for more information or for referrals to local lenders that our clients have recommended because of their exceptional customer service and competitive rates.