Pre Approval vs Pre Qualify | What is the difference and what is better?

There is a significant difference between pre approval and pre qualify. When you are starting the process of buying a home most lenders will pre qualify a buyer. Don’t be confused this does not mean you are pre approved for a loan. Many buyers who don’t know the difference can end up losing a home that they are dreaming of.

Lets talk about pre approval vs pre qualify

Pre Qualify

Pre Qualify is the first step in the loan process and is very simple and easy to acquire. It can consist of talking to a lender over the phone for 5 minutes or answering some questions on the internet about your financial situation, such as your income, debt and assets. The lender will also go over what your goals and needs are. After a lender evaluates the information you supplied they will be able to give you an idea of the mortgage amount you may qualify for and what your options will be.

The loan pre qualification process is easy free and doesn’t include the lender doing an in depth analysis of your credit report and your ability to purchase a home. Because it is a quick and simple process based only on the information you give the lender your pre qualification isn’t a assurance you will get a loan. This is where the difference between a pre qualification and pre approval really matter. A buyer with only a pre qualification doesn’t carry as much weight with a seller as a buyer with a pre approval letter does.  Any experienced listing agent will advise their seller to look at a buyer with a pre approval letter with their offer in a better light.

Pre Approval

Pre approval is the next step and is much more in depth than the pre quailify process. With a pre approval you will actually meet with a lender and fill out a loan application and possibly pay a loan application fee. At the appointment you will supply the lender with all the supporting documentation to perform an extensive credit and financial background check. At this point the lender should be able to give you a better idea of what amount you are approved for to buy a home.

Once the lender has gone over all the documentation, credit and financial background they will be able to supply you with a conditional loan pre approval letter. The conditional letter will have the exact amount you are approved for with interest rate and type of loan. Your real estate agent will forward your pre approval letter with any offers you are submitting. This will show sellers that you are serious and one step further in the loan process.

Both the pre qualification and pre approval should be done prior to looking at homes. This will eliminate wasted time and heartbreak because you will know how much house you can afford and you will be able to move quickly when you find the perfect home. Initially the lender will leave the property address blank on the pre approval letter and once you and your real estate agent have an executed contract they will will identify the property on the loan commitment letter.

Loan Commitment

Loan commitment is the final step in the loan process. During the 30 day escrow process the lender will be performing the appraisal, a final credit check on you and any other conditions that are requested. The lender can request conditions to be cleared up until the last few days of the escrow process. Once the lender is satisfied and has final approval on you and the home you are buying they will generate a loan commitment letter.

Pre approval vs pre qualify

It is very important to work with an agent who knows the difference between a pre approval and pre qualify. A qualified agent will be able to look out for your best interest and follow the process from pre qualify to loan commitment. Because if you or your agent are not aware of the difference it could cost you your new home! The Gonzales Team of agents is committed to educating our client’s through the process and you want to work with the Gonzales Team who is committed

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