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Pre-qualifying & pre-approval - what's the difference?
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!
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