The difference between a Pre-Qualification vs. Pre- Approval is pretty simple actually, but one is definitely preferred over the other.
There are plenty of real estate terms used in transactions. Needless-to-say it can be confusing for both buyers and sellers trying to navigate the process. The home loan process might feel overwhelming and difficult to understand. Both buyers and sellers find terms like “Pre-Qualification” and “Pre-Approval” used interchangeably, it’s no wonder they find themselves wondering how to proceed.
The first step in obtaining a home loan is to meet with a lender and discuss your financial situation. The lender will discuss income, job stability, debt and credit. Once they have performed a basic review of the qualifications and run credit, they will issue a Pre-Qualification Letter to the potential buyer. This letter will identify the maximum sales price, down payment requirement and basic terms of the loan, such as interest rate. The Pre-Qualification letter is then used to provide evidence that the buyer has been reviewed by a lender who is vouching for their ability to obtain a loan.
A Pre-Approval is quite different. In this case, the lender collects all the necessary information and proof of eligibility and has it reviewed by the lender underwriter for approval. A Pre-Approval letter is almost like shopping with cash, the only remaining piece of the puzzle is the property they are buying.
In a fast paced market such as ours where multiple offers have become somewhat of the norm, its ideal to put your best foot forward and be Pre-Approved. Im sure you can imagine how this makes the seller more compelled to accept your offer over others that only have their pre-qualification submitted with their offer. The Pre-approval shows that you are fully committed to purchasing a home and have done all of the leg work on your end.
Now, to choose a Lender. Its not as easy as you may think! Would you like a list of my preferred lenders? I'd be happy to refer you to a reputable and trusted company, all you have to do is email me and I'll get the list right over! Krystal@westandmainhomes.com
Happy Qualifying! I mean, Approving!