What’s the Difference between a Pre-Qualification and a Pre-Approval?
When it comes to buying land or a home with more acreage than normal properties, the process can be a little more cumbersome than usual. Because the market is smaller and the prices are higher, sometimes realtors will require a pre-qualification before showing a property. We get a lot of inquiries from those looking to buy properties with acreage for pre-qualifications and pre-approvals, and wanted to clear up the differences between the two.
What is a pre-qualification?
A pre-qualification is a letter stating that you simply qualify as a loan applicant for an estimated amount and the individual property you’re inquiring about. In order to pre-qualify you for a rural property, we’ll request your name, address of the property and the property type. It is important to note that your credit will not be run, so the qualification for a loan amount doesn’t signify approval.
When would I need a pre-qualification?
A good time to request a pre-qualification is if you’re first starting the buying process, are actively looking at properties and potentially ready to make an offer. During this time, you’ll discuss goals and any other potential financing needs with your loan officer. If your realtor is requesting a pre-qualification letter to view a specific property, it’s best if you know in advance, as these letters can take anywhere from a day to three days to develop.
What is a pre-approval?
A pre-approval is more in depth and a more accurate indication of funding availability for a certain property. In order to get a pre-approval for a rural property, you’ll need to submit the same information needed for a loan application. This could include up to three years of tax returns, a balance sheet or financial statements (assets, liabilities, including current loans, payment history, etc.), and a copy of your driver’s license. If you’re ready to run with the sale, you’ll also need to provide a signed sales contract. The main difference between a pre-approval and pre-qualification is that the pre-approval will receive full underwriting and essentially be the approved loan up to dollar amount noted.
When do I need a pre-approval?
A pre-approval will be needed if you’re looking to move quickly on a specific property or to make a serious offer. In rural America, no two properties are identical, and those classified as agricultural will be a little different from your run of the mill mortgage. A pre-approval for agricultural land will be applicable to that individual property and no others. The pre-approval will translate into the loan application if you decide to move forward with purchasing the property.
Buying rural property can be confusing and overwhelming, but following through and owning your own piece of land makes the process worth it. We specialize in financing agriculture and rural America, so we’re ready to help you navigate this process with ease.
If you have a property in mind that you’re ready to call your own, give us a call today to speak with a loan specialist and request your pre-qualification or pre-approval.