What Is The Difference Between A Pre-Qualification & A Pre-Approval?

What Is The Difference Between A Pre-Qualification & A Pre-Approval?

One mistake that home buyers commonly make is not getting a pre-approval.  Many home buyers believe that a pre-qualification is the same as a pre-approval, which is not true.

A mortgage pre-qualification can easily be defined as an estimation of how much a buyer can borrow.  In many cases a pre-qualification is only as good as the piece of paper that it’s written on.  It’s fairly common practice that a mortgage lender who pre-qualifies a buyer asks them for information such as income, debts, and other assets without verifying the information.  If a buyer is not truthful or makes a mistake when giving the information this can lead to problems in the future when the mortgage is verified by an underwriter.

A mortgage pre-approval is what every home buyer should obtain prior to looking at homes.  This can be easily defined as a written commitment for a buyer from a mortgage lender.  To obtain a mortgage pre-approval a buyer will be required to provide the same documents that are required when formally applying for a mortgage, such as w-2’s, pay stubs, and bank statements.

There are many reasons why a mortgage pre-approval is better than a mortgage pre-qualification. 

Two of the most important reasons why a pre-approval is better than a pre-qualification:

  • Helps buyers beat out competition in multiple offer scenario or strong seller’s market
  • Gives peace of mind to a seller when submitting offer that the mortgage will be approved

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