Step 2: Obtain Pre-Approval or in some cases an Approval for the financing being requested
What is the difference between a pre-approval vs. an approval?
Another great question!
A pre-approval is a snapshot of how your application looks at a moment in time and holds onto an interest rate for a short period of time for you (which is often 120 days). In some cases, you can have the interest rate held longer and if available this will be discussed with you. A pre-approval is not a guarantee of a mortgage approval and you, along with the property, will need to re-qualify for that financing you are seeking within 120 days of the closing date/date of completion of the financing being taken.
If someone suggests otherwise, you need to make sure you meet the lenders conditions, not them, as you are the person signing the contracts and/or commitments and will need to ensure you can close on what you are signing into.
On the other hand, an approval has the property and applicants (you) reviewed and approved for the financing being requested. An approval is just like the pre-approval where you are approved based on how your application read in that snapshot. Again, any changes to your application could change your pre-approval and/or approval so make sure you discuss changes with me in advance, otherwise you may be putting yourself in harm’s way. You want to always make sure you can re-qualify (at minimum) until the day you take possession of the property or until you close the financing you are working on. It is highly suggested you do not change your credit or seek additional credit during this time as it won't be reflected. Any changes should be discussed in advance.