Pre-Qualification vs Pre-Approval Letter...There Is A Big Difference
My Active Rain sister and friend Debbie Laity has written about the difference between a pre-qualification letter vs a pre-approval letter. Read on and check this out it is important!
Pre-Qualification vs Pre-Approval Letter...There Is A Big Difference. In this case we are talking about a mortgage pre-qualification or pre-approval letter. As a consumer looking to buy a house, you will hear these terms used by real estate agents and lenders. Sometimes the terms pre-qualification and pre-approval are used interchangeably. While they may sound the same, there is a big difference.
The loan pre qualification process is relatively easy. You can even get pre qualified for a loan over the internet. Most of the larger banks are set up to pre qualify you for a loan online or over the phone. When you get pre qualified, you are giving a lender your basic information and that information is used to determine a price range in which you might qualify for a mortgage. The information you give to the lender is basically a snapshot of your financial situation. You will provide the lender with some basic information like how much you make, a social security number, permission to run a credit check and any loans you might have. After that the bank will issue you a pre qualification letter. There is usually a disclaimer that states this pre qualification is subject to income verification, credit worthiness, etc.
The process to get a pre-approval letter takes a bit more time. Here you will actually exchange verified information with a lender. This will include such things as pay stubs, bank account information, work history and income tax forms. You will fill out a mortgage application and pay a processing fee. A lender will run a credit check. After a review of all of the information, the lender will determine whether you qualify for a loan and if so, for how much. This process will also give you a good idea of what your interest rate is going to be and how much your monthly payments will be if you max out the amount on your pre-approval letter.
Because verification is done for a pre-approval letter...it carries a higher level of consideration with a seller when you submit an offer on a house. Having a pre-approval letter shows a seller you are a serious home buyer, and you have already completed the loan application process. In a competitive market having a pre-approval letter can mean the difference between having your offer accepted or not.
I've lived on Colorado's Western Slope for over 22 years. I love this area and all it has to offer, and I enjoy sharing what I know about my home. As a REALTOR®, I also love to share my expertise in this area as well. If you need any real estate information for Montrose County, or Delta County, Colorado...please give me a call.
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