Pre-Approval vs. Pre-Qualification

A pre-approval represents a powerful tool for you towards the purchase of that home with a minimum of surprises and disappointments. And most importantly, it presents you as a “cash” buyer to the seller.

Anyone who wants to buy a home today should go to their lender first. The understanding of how much can be borrowed precisely reduces the possibility of disappointments later. And a letter of pre-approval can be the mechanism that makes that happen. There is a distinct difference between a letter of pre-qualification and a letter of pre-approval and it is important to understand that difference.

Pre-qualification means that there have been calculations made that show how much you may be able to borrow. While pre-qualification can reduce the processing time for home loans, indicate how much house you can afford and provide a certain leverage in the bargaining process, it doesn’t necessarily guarantee that such a loan will be made by the lender.

Pre-approval means that you actually have a loan waiting, subject only to finding the house and the house appraising at the sales price. The pre-approval represents an actual commitment on the part of the lender. In order to secure such a letter, it is necessary to complete a formal loan application and pay the associated fees. Credit, salary and bank funds will be checked then the lender will issue a pre-approval letter which provides a commitment for a limited period of time subject to property and title search.

Please contact us if you have any questions.
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