Pre-Qualified VS pre-approved For a mortgage: what's the difference?
Pre-Qualified VS Pre-Approved: What's The Difference?
Getting pre-qualified for a mortgage is important before you start house hunting. But honestly, being pre-approved is where it’s at. So, what’s the difference between pre-qualified and pre-approved for a mortgage?
Pre-Qualification
Getting pre-qualified is a breeze. You can usually do it over the phone with your lender or online in just a few minutes. All you need to do is give your lender some basic info about your income, debts, and assets, and they’ll whip up a pre-qualification (or “pre-qual”) letter for you. It’s free, and the lender won’t dig deep into your finances or pull your credit report. So, while they’ll give you a ballpark figure of how much they might lend you, there are still plenty of financial hurdles to clear before you get the actual loan.
Getting pre-qualified is a good first step to see how much home you can afford and might be enough to start home shopping. It’s also handy when making an offer to a seller. Many sellers, and even some real estate agents, don’t know the difference between being pre-qualified and pre-approved. So, when an offer comes in with a pre-qual letter, sellers often think the buyer is guaranteed a loan. But, this letter doesn’t really hold much weight, other than being on the bank’s letterhead. It will usually include a disclaimer like this:
This is not a loan approval, and final approval is subject to verification of the borrower’s credit history, income, assets, debt ratio, clear title to the property, and a satisfactory appraisal of the property.
Pre-Approval
Being pre-approved means you’ve already applied for a loan and submitted all your financial documents (tax returns, bank statements, pay stubs, etc.) to the lender. You might have paid a loan application fee too. Basically, you’ve been underwritten by the lender, so now it’s just about finding a property that works for you. Since you’ve already proven your creditworthiness to the bank, a pre-approval letter carries way more weight than a pre-qual letter.
Getting pre-approved before making an offer also means you can close faster. Since you’ve already been underwritten, the appraisal and title examination can be ordered right away. Once the lender reviews those, you’re ready to close.
When there are multiple offers on a home, pre-approved buyers have a big advantage over pre-qualified buyers. If you want to know how much home you can afford and get pre-qualified, or if you’re ready to buy and want to get pre-approved to move quickly when you find the right home, contact us or check out our great local lender references.
