Pre-Qualified vs. Pre-Approval What is the difference and which is better?

Does it Help to be Pre-Qualified by a Lender?

The pre-qualification process can be completed fairly quickly, based on less information than is required for getting pre-approved. While it is fast and it does help, a pre-qualification letter is an opinion from a lender of the maximum amount of real estate you can qualify for, giving the buyer an idea of what they should look at in terms of home prices. In a competitive seller’s market, an offer from a buyer with a pre-qualification letter could lose out to a person who is pre-approved.

The Pre-Approval

A pre-approval is the strongest approval that can be issued. When a pre-approval is given, the lender will not only verify the information the customer submits on the loan application, but they will also double-check it, verify all their assets with the bank to make sure they are available at the time of closing, review their credit and review their job history. These are all critical things necessary to close a loan properly. As many as 3 out of 10 loans never close. This is an alarming number, and it’s due to the fact that some lenders do not properly issue a pre-approval for a customer from the very beginning. Be prepared to provide comprehensive documentation, which the lender may independently verify, including but not limited to:

• Job and career status
• Monthly debt payments
• Total assets and debts
• Income
• Cash available