Pre-Qualification vs. Pre-Approval

There’s a significant difference between getting Pre-Qualified for a loan and getting Pre-Approved! Below is an excerpt from a great blog post that explains the difference – “Pre-Qualification vs. Pre-Approval” by Joe Anderson, Market Leader, Movement Mortgage:

“Pre-Qualification or Pre-Approval? Oddly enough some of our Real Estate/Finance community is not exactly sure what the difference is, or if it is of any value. Well, we are now in a market where the Sellers’ are finding themselves in the catbird seat. Several offers are being made on just one property, and the Seller is in a position where they can really scrutinize the offers being made. Offers accompanied by lender letters that state: Must sell current home for down payment, Pre-Qualification letter stating that the credit was pulled and reviewed. In most cases the Loan Officers are not even looking at compensation or asset statements. These types of letters are subject to practically all the contingencies and usually comment that it will need to be reviewed by an Underwriter. The application will have to be underwritten! REALTORS® that are not quite sure of the subtle differences or able to distinguish one letter from the other are finding themselves asking better questions on the validity of the letter that they are receiving. Is it worth the paper it is written on?

Typically these letters are directly from the Loan Officer that have possibly pulled credit, may have run an Automated underwriting engine, or even shared the information with a processor, but not Underwritten. So, what is the main difference between pre-qualification letter vs. Pre-Approval? Pre-Qualification is an Opinion vs. a Pre-Approval is Underwritten/Approved Buyer. Some Realtor’s are still satisfied with an Opinion letter and will gladly accept these letters although there is a better alternative.”

Click here to read the complete article by Joe Anderson >>