Pre-Qualification vs. Pre-Approval: What’s the Difference?
When you begin the process of buying a home, you may come across new words and phrases that may be unfamiliar to you. In today’s competitive housing market, it is important to be knowledgeable about certain real estate terms to help put yourself in the best purchasing position possible.
As you prepare to apply for a mortgage, you will come across terms like “pre-qualification” and “pre-approval.” What is the difference between these two documents? Simply answered, one is silver and one is gold. Although they sound similar, only the pre-approval will get realtors and sellers to take you seriously. Let’s take a closer look:
Pre-qualification: Typically, a pre-qualification is an unverified, informal analysis of your financial picture to determine how much you can afford to pay for a home. It’s based on information that you provide about your credit, debt, income, and assets, without officially going through a formal application process. Based on your overall financial picture, the lender can estimate how much you may be able to qualify for. Getting pre-qualified can give you an idea of your financial readiness along with different mortgage options to consider as you begin exploring a home purchase.
Pre-approval: While a pre-qualification can be a helpful tool in the beginning stages of the lending process, a pre-approval is crucial when you are ready to take the home buying process to the next level. It requires a formal application with proof of your financial history and stability. The lender will request documents to verify your income, assets, & debt and will also request your credit report. If you meet the requirements of obtaining a mortgage, you will receive a pre-approval letter that will state the amount and type of mortgage the lender is willing to offer, along with terms and any conditions. Real estate agents and sellers will want to see the pre-approval letter before showing and accepting an offer on a property.
At Stillman Bank, we employ the latest technologies to provide some of the fastest service available in today’s market. Our automated underwriting system allows lenders to provide credit underwriting decisions within minutes at the time of a completed application. This means when you receive a pre-approval from us, it is timely and sound. Additionally, our loan decisions are made in-house and we service the majority of our loans. This means your investment with Stillman Bank is getting re-invested right back in the community where you live and work!
Whether you’re just beginning to think about homeownership or are ready to start searching for the perfect home, contact me to help you through the process.
Diana D. Davidson
NMLS No. 746408