Mortgage FAQ

6. What is the difference between pre-qualifying and pre-approval?

Pre-qualification is normally done by a loan officer. Once the loan officer has interviewed you, he or she will determine the dollar value of a loan you could be approved for. However, since loan officers do not make the final loan approval, pre-qualifying a borrower is not a commitment to lend to them. Once the loan officer has determined that you pre-qualify, he or she will issue you a pre-qualification letter. This pre-qualification letter is useful when you are making an offer on a property, because it 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 requires verifying your credit, down payment, employment history, etc. An underwriter reviews your information and application and makes the decision regarding your loan. If you are pre-approved, you will be issued a pre-approval certificate. Getting your loan pre-approved allows you to close very quickly when you find the house you want to buy. A pre-approval is beneficial because it allows you to negotiate a better price with the seller, since being pre-approved is seen as the next best thing to having cash in the bank to pay for the house.

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