What is the difference between pre-qualifying and pre-approval?
A pre-qualification is normally issued by a loan officer,
who, after interviewing you, determines the dollar value of a loan you
can be approved for. However, loan officers do not make the final
approval, so a pre-qualification is not a commitment to lend. After the
loan officer determines that you pre-qualify, he/she then issues you a
pre-qualification letter. This pre-qualification letter is used when
you are making an offer on a property. The pre-qualification letter
indicates to the seller that you are qualified to purchase the house
you are making an offer on.
Pre-approval is a step above pre-qualification. Pre-approval
involves verifying your credit, down payment, employment history, etc.
Your loan application is submitted to an underwriter and a decision is
made regarding your loan application. If your loan is pre-approved, you
are then issued a pre-approval certificate. Getting your loan
pre-approved allows you to close very quickly when you do find a house.
A pre-approval can help you negotiate a better price with the seller,
since being pre-approved is very close to having cash in the bank to
pay for the house!
