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What is the Difference Between Pre-Qualified and Pre-Approved for a Loan?

By
Real Estate Agent with RE/MAX AEROSPACE REALTY www.LauraSellsBrevard.com SL3236966

 

What is the Difference Between Pre-Qualified and Pre-Approved for a Loan?

 

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To purchase a home, most people will need to speak with a mortgage banker or mortgage broker to determine how much they can afford to spend by getting pre-qualified or pre-approved for a loan.  The terms “pre-qualified” and “pre-approved” sound as if they mean the same thing, and are often used interchangeably; however, there are important differences that consumers should understand.

 

Getting pre-qualified provides an estimate of the amount you can borrow and the types of loans available to you based on the information you provide.  Pre-qualification can even be accomplished over the phone and at no charge.  You supply the lender with information such as your income, debts and assets, and they will perform a credit check.  Your pre-qualification letter will indicate a loan amount for which you are likely to be approved, but it is not a loan guarantee. The pre-qualification estimate is only as good as the information you provide, but it does serve as a guide to the appropriate price range of homes for you to consider.

 

Getting pre-approved for a loan is more involved, and it provides you with a specific amount you can borrow based on a more thorough review of your financial data.  You begin the process by completing a mortgage application, paying the application fee, and providing the lender with certain financial documents such as W-2 forms, bank statements, and any documentation of your other assets.  The lender will also verify your employment and perform a credit check.  All of this information goes through the underwriting process to provide you with a conditional commitment for a specific loan amount.

 

Getting pre-qualified or pre-approved is only the first step.  I am realtor in Brevard County, Florida and I work with homebuyers every step of the way in purchasing a home, and I look forward to working with you.

 

Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

This is a question that comes up often and you did a great job of explaining the distinction.

Jan 15, 2011 02:54 PM
Jeramie Vaine
Century 21 Carioti - Orlando, FL

Knowing the difference can make or break a deal, being have the pre-approval letter saves time and frustration!  Nothing like having a deal approved and then loosing it because the financing fell through.....proactive not reactive get the approval letter done!

Jan 15, 2011 02:58 PM
Cheryl Ritchie
RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD
Southern Maryland 301-980-7566

Pre approval can mean the difference in getting the home that you really want.

Jan 15, 2011 03:00 PM
John Pusa
Glendale, CA

Laura - Thank you for a very good information on the difference between pre qualified vs pre approved for loan.

Jan 15, 2011 04:19 PM
Mary Yonkers
Alan Kells School of Real Estate/Howard Hanna Real Estate - Erie, PA
Erie/PA Real Estate Instructor

Good explanation, Laura.  The graphic fits the post.

Jan 16, 2011 01:17 AM
Bob & Leilani Souza
Souza Realty 916.408.5500 - Roseville, CA
Greater Sacramento Area Homes, Land & Investments

Laura, I'm going to re-blog your post...I love the simple explanation you provided that will help buyers understand the difference between a pre-qual and a pre-approval. :)

Leilani

Jan 16, 2011 10:25 AM
1~Judi Barrett
Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Laura,

Simple and easy to understand.. well written. 

A wonderful job.

Jan 16, 2011 12:08 PM
Laura Forman
RE/MAX AEROSPACE REALTY www.LauraSellsBrevard.com - Melbourne, FL
Your Brevard Premier Property Specialist

Joan, John, and Mary - Thank you for reading and your kind comments.

Jeramie, and Cheryl - I agree that it is best to get pre-approved and I was actually planning to blog on that topic this week.

Lailani - Thank you for your comment and the re-blog.

Jan 16, 2011 02:09 PM
Jack Mossman - The Nines Team at Keller Williams in Lodi
The Nines Team at Keller Williams in Lodi - Lodi, CA
The Nines Team in Lodi

Laura - Thanks to a reblog by Judi I found this.  It is perfect for an explanation to a new agent orientation class.  Thanks for making it clear and easy to understand!

Jan 16, 2011 02:56 PM
Laura Forman
RE/MAX AEROSPACE REALTY www.LauraSellsBrevard.com - Melbourne, FL
Your Brevard Premier Property Specialist

Judi and Jack - thank you.  I like the idea of a new agent orientation class!

Jan 18, 2011 04:40 AM
Scott Hayes
(512) 786-8300 - Austin, TX
Realty Austin, Broker Associate

Laura

 

Excellent explanation of the prequal and the preapproval. As I always say, we do this stuff every day, but the consumer only learns these terms when they have to.

Jan 24, 2011 03:20 PM
Laura Forman
RE/MAX AEROSPACE REALTY www.LauraSellsBrevard.com - Melbourne, FL
Your Brevard Premier Property Specialist

Scott - that is exactly why I posted this.  I hope it helps first time buyers.

Jan 25, 2011 05:17 AM
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

Funny reading this when I was told just last week by a Wells Fargo member that the prequalification letter was the more involved of the two and that the REO branch would not accept the preapproval, that they wanted the prequalification letter. They required the buyer's W2s and other paperwork to give him a prequalification letter.

And people think it is confusing - even the mortgage industry can't get it right it seems to me!!!

Jan 27, 2011 03:30 AM