Pre-Qualification and Pre-Approval

As a Buyer, it is important for you to know and understand the difference between having Pre-Approved status and Pre-Qualified status. Many sellers are concerned with home security and do not want to put forth the effort to show their home to Buyers who may not qualify to purchase their home. As a Buyer you must realize that you may not be able to see many houses if you are not Pre-Approved or at least Pre-Qualified.

Pre-Qualification consists of answering a short series of questions regarding your income, assets, and debts. The lender then gives you a ballpark figure of what loan amount they would qualify for. This is not a commitment from the lender, but it is a good starting point for you to know "how much house" you can afford.

Pre-approval is the lender's conditional commitment for a loan of a certain amount at a certain rate. This commitment has a time limit and usually a few conditions such as an acceptable appraisal and final underwriting to ensure there are no changes or hidden problems.

Pre-qualification provides a general guideline of the loan amount a lender is willing to provide. It does not constitute a final loan approval. Pre-qualification is a positive step, but it does little to prove to sellers that you can afford to buy their property. Pre-approval means you have completed a loan application, had your credit checked and that a lender has approved your loan for a specific amount and interest rate. You can then present this document to a seller as proof that you can afford his or her property. Pre-approval helps signal to sellers that you are making a serious offer. Be aware that final approval may depend upon property appraisal, existing liens, inspections or other factors.

Pre-approval demonstrates to sellers that you can afford their home, and boosts your credibility and negotiating strength. Over time the real estate transaction process has changed and evolved, today prequalification and pre-approvals are a necessary part of the home buying process. Not only will it give you an exact price range for your purchase, preapproval will add a great deal of strength to your offer.

Prequalification provides a general guideline of the loan amount a lender is willing to provide. It does not constitute a final loan approval. Prequalification is a positive step, but it does little to prove to sellers that you can afford to buy their property.

Preapproval means you have completed a loan application, had your credit checked and that a lender has approved your loan for a specific amount and interest rate. You can then present this document to a seller as proof that you can afford his or her property. Preapproval helps signal to sellers that you are making a serious offer. Be aware that final approval may depend upon property appraisal, existing liens, inspections or other factors.