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What’s the Difference? Mortgage Loan Pre-Approval vs. Pre-Qualification

Real Estate Agent with CBSHOME Real Estate

Most of my clients can't afford to pay cash and so it's imperative to learn their spending limit and how the house payment will impact their budget.  The first thing I tell my Buyers is to visit with a mortgage loan officer (or 2) to determine how much they can spend on a property. 

I encourage my Buyers to obtain a Pre-Qualification Letter rather than a Pre-Approval.  What's the difference?

  • Pre-Qualification means the information you provide to the mortgage officer has been verified with the appropriate documents and a credit check. 


  • Pre-Approval is usually just talking for 20-30 minutes with a mortgage officer with no proof of income, credit score, etc.  With the limited information and with no verification the lender gives his/her "best guess" of what the Buyer can afford.    

 I believe the first choice, Pre-Qualification, is the only choice for 3 important reasons.

  1. The most important reason is the Buyer can have the peace of mind they need when looking for and buying a home.  The Buyer now knows his/her top limit.  If the Buyer's top limit is $150,000 they can look for a home up to $130,000.  That way they have plenty of cushion to pay fees, moving charges and closing costs.                                                                                                                              
  2. The Realtor will be able to concentrate on finding homes in the real price range. It's a waste of everyone's time and effort for a Realtor to show a Buyer houses for $250,000 if their real limit is $150,000.    
  3. When an offer is made on a home the Seller will know they have a serious Buyer if the Buyer is Pre-Qualified.  That makes a huge difference in the ever important negotiation process.                    

 I urge Buyers to see a mortgage lender first before looking at homes for sale.  This is a vital first step.