I'm sure you have heard your real estate agent use the terms pre-approved and pre-qualified for a mortgage. But, don't they mean the same thing? No, they are not the same.
Pre-qualification is the process by which a loan officer estimates the amount you can borrow based on the information you provide about your income, assets and debts. There is no formal application or verification of that information, so it is only a rough estimate. Simply put, it is based on your say so.
Pre-approval is just the opposite. It involves a formal application that goes through underwriting for verification of the information you supplied. Basically, it is the same process that all buyers go through for loan approval, except that pre-approval is done before you find the home you want to purchase. Upon pre-approval, you receive a formal commitment from the lender stating how much you can borrow and at what rate.
So, when you decide to place an offer on a home you want to buy, consider including a pre-approval letter instead of a pre-qualification letter with it. When it comes to multiple offers, it can make a difference.
I always provide both Pre-qual and Pre-Approval letters for all my clients and Realtors, so the paperwork is out of the way and the buyer knows what they can purchase.
This is great because it saves time, and heartaches in the long run.
Scott:
If we can speed the process up, the better all the way around.
Brigita
Wow- a great post and a job offer with medical billing.
thanks for providing the difference.
Kim:
Have no clue what medical billing has to do with mortgages and pre-approvals. ????
The confusion between the two needed to be cleared up.
Brigita