Pre-Qualification or Pre-Approval?
At some point in the mortgage process, the terms “pre-qualification” and “pre-approval” will arise. The difference between both will be crucial as you decide to make an offer on your new home.
With pre-qualification, we work with you to determine the maximum loan amount you may qualify for, based on your current income, debt and other financial factors, like your credit report and history. Pre-qualification is an informal process that requires no official documentation apart from your credit report.
Pre-approval can give you an advantage over other potential buyers because it proves to sellers that you’ve got financial backing through your lender. Pre-approval is backed by official documentation, such as your paycheck stubs, tax returns, bank statements and employment verifications to obtain an actual monetary commitment letter from a lender. When approved, you’ll receive an official letter of commitment.
Your pre-approval letter signals to the seller that there will be few, if any, snags to the purchase (such as the “falling through” of financing), and that the whole process will be smoother, shorter and more seamless if they accept your offer.