Pre-Approval Vs. Pre-Qualification!

Posted by Admirals Cove Homes on May 31, 2014 in Home, Real Estate | 5 comments

Getting a financial frame of reference for your home search is extremely important to the success of your home buying experience. However, it has come to our attention that more and more people don’t fully understand what being pre-qualified and pre-approved means and the difference between the two. These two terms have very different meanings and have different impacts when it comes time to make an offer.

Pre-Approval: Getting a pre-approval from a lender means that the lender has done some extensive and significant research into your financial history and they have agreed to loan you a certain amount. This carries much more weight than pre-qualification and sellers love seeing that a potential buyer has already been approved for an amount equal to the sales price. Pre-approval conveys very clearly to sellers that all of your finances are in order and you are truly ready to buy.

Pre-Qualification: In contrast to being pre-approved, being pre-qualified for a loan is seen as more of a rough draft of what a potential buyer might be able to afford. It really says nothing about what you can afford, and it basically means that you may be able to afford that amount and that you probably could obtain a loan for that amount. When a seller sees a pre-qualification letter in an offer it will hold some type of credibility just not the same as a pre-approval.

While both pre-approval and pre-qualification letters are better than having nothing to show at all. Being pre-approved carries much more weight and conveys a great deal more credibility to sellers than just getting pre-qualified. So, if you are a serious buyer and want to be perceived that way be sure you get pre-approved as soon as you possibly can.