What is a mortgage preapproval, and how does it work? - Business Insider

are similar steps in the homebuying process. They're both ways for lenders to tell you what the terms of your mortgage could be, but they have some key differences., you'll tell a lender information such as your income and credit score. But you don't have to provide any official documents, and the lender won't perform a hard credit inquiry .

That preapproval requires official documentation and a hard credit inquiry, which affects your score. Preapproval letters are only valid for two or three months, so if you're still a ways out from buying, start with prequalification to get a general idea of what buying a home could mean for your finances.What's the difference between mortgage preapproval and approval?

Getting preapproved for a mortgage doesn't guarantee you'll be officially approved, because a) your financial situation may have changed in the two or three months you've been shopping for homes, and b) approval partly depends on the state of the home you want to buy. A lender also might decide not to approve you if something goes wrong with the inspection or appraisal. For instance, if your appraisal shows the home value is significantly lower than the listing price, then you may not be approved.A mortgage preapproval may sound like a superfluous step in the homebuying process, shoved between prequalification and approval. Do you really need to apply for preapproval?First of all, applying with multiple lenders helps you compare and contrast what each offers.

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