Mortgage Loan Pre-Approval or Pre-Qualification – What’s the Difference?

Are you’re considering buying a house? Are you wondering how much you can afford?  You definatley don’t want to fall in love with a home only to discover that you can’t afford to buy it.  So find out your house-hunting budget by getting pre-approved for a mortgage loan.

There’s a big difference in getting pre-qualified vs pre-approved, yet these terms are frequently confused and used interchangeably.  Both terms refer to a letter provided by a lender stating that they are willing to lend you a certain amount of money based on your finances.

The Pre-Qualification Letter

This is typically the first step in a mortgage application process with pre-approval to follow.  With pre-qualification, you’ll supply an overview of your financial history to the lender, including income, assets, debts, and credit score. The lender will review this information, often from just a phone call, and give you an estimate of  how much you will qualify for (how much they will lend you). Mortgage pre-qualification doesn’t necessarily require proof of your finances and is often self-reported.

The Pre-Approval Letter

A fully underwritten pre-approval letter if far superior as it provides greater assurance to a potential seller that your mortgage will be approved. This requires documentation and verifiction of income, assets, debts and a credit check. It provides far greater validation and removes many of the potential obstacles before approval is granted.

A serious buyer will greatly benefit from obtaining an underwritten loan pre-approval.  It allows for financed buyers to compete with cash buyers, who have a distinct advantage in the multiple offer situation. Cash buyers tend to get the best deals and can close quickly. It also puts the buyer at a distinct advantage in the negotiation process when competing with other financed offers.

And some sellers require a buyer to submit a fully vetted pre-approval with the offer or the offer will not even be considered. Home sellers have much greater confidence knowing that the mortgage loan approval requirements and documents have already been approved by an underwriter. It strengthens offers by showing a buyers’ investment of time and commitment to the purchase.

If you are thinking of buying a home, reach out to me today and I’ll connect you with several mortgage experts who can advise you on home loans and help you obtain a pre-approval.  305.898-1852  wellins.d@ewm.com   Or click this link.

 I’d love the opportunity to work with you!