Pre-Qualification vs. Pre-Approval

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Real Estate

Pre-Qualification vs. Pre-Approval

One sure way to reduce stress during the process of home buying is to seek a pre-approval.  Buyers who are pre-approved are taken more seriously than their pre-qualified counterparts.

Pre-qualification is not a loan commitment from a lending institution; it is only a loan agent’s opinion that you will be able to obtain financing. Virtually anyone can achieve pre-qualification status and it really is a worthless piece of paper.  Pre-approval, on the other hand, signifies that the application has been taken through a rigorous procedure.  Pre-approved buyers enjoy these benefits:

1. If you make an offer on a home and then apply for a loan, you are at the lender’s mercy.  He sets the interest rate and points, aware that you do not have time to shop around.

2. Pre-approval saves time spent looking at houses you can’t afford.

3. If you rely on your lender to tell you what you can afford, you may end up with a high mortgage payment.  Most people can qualify for more than they feel comfortable paying.

4. Having a pre-approval letter from a lender gives you an edge when multiple offers have been made on a house.

5. Pre-approved buyers can generally close escrow more quickly.  Once you submit your credit package, most of the legwork has already been done.

You will still need to go through the loan commitment process, that is when the lender commits to lending you the money for your new home, but the odds are very good that you will get that loan.

If you have further questions or would like the names of some local lenders my previous Buyer's have used, just give me a call, text me or send me an email and I will send them to you.