The Difference Between Pre-Qualification & Pre-Approval
There are plenty of real estate terms used in transactions. Both buyers and sellers find terms like “pre-qualification” and “pre-approval” used interchangeably. Is there a difference?
The first step in obtaining a home loan is to meet with a lender. The lender will discuss income, job stability, debt and credit. Once the lender has 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 that the lender is willing to lend. The pre-qualification letter is used to provide evidence that the buyer has been reviewed by a lender and 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 an underwriter for approval. A pre-approval letter is almost like shopping with cash, the only remaining piece of the puzzle is the property you are buying.