Pre-Approved v. Pre-Qualified - What's The Difference

By
Real Estate Agent with Only Way Realty / UpstateHomeSeller.com

                         Pre-Approved v. Pre-Qualified

What's The Difference?

 

I quite often hear people using the terms Pre-Approved and Pre-Qualified interchangeably, when in fact there's a big difference.  Let's take a look at the two and why one is much stronger than the other.
 

Getting pre-qualified is actually the first step in the mortgage process.  It's also a step you should complete before you start looking for homes. The Mortgage Applicationpre-qualified process is an exchange of information between yourself and the lender.  The lender will get a overview of your financial picture and based on your goals and objectives, they will be able to provide to you a maximum amount of what you MIGHT be able to afford.  The emphasis is on MIGHT because nothing has been verified, it's based just on a discussion.  But it's a very important discussion as one of the reasons you want to complete this step first is that you don't want to fall in love with a $200k home only to find out that the most you can afford is $175k.

Completing a pre-approval process is a much more rigorous process.  Your lender will request documentation to substantiate the information you provided.  They will pull your credit report and fico scores, check your employment and determine your debt-to-income ratio (no more than 28% of your income can go towards housing and 36% towards total debt).  Once this is completed you've put yourself in a stronger position to purchase that new home then just being pre-qualified. 

Here's an example of why.  The home seller receives two competing and similar offers. One of the potential buyers is pre-qualified, the other is pre-approved.  The pre-approved offer will win out over the pre-qualified as their offer is more likely to receive the final approval by the lender.

So it's important to start the mortgage process as early as possible in your home buying but it's even more important to get pre-approved!

Posted by

Gene Donohue
Exclusive Buyer's Agent
www.GreenvilleBuyersAgent.com
Gene@GreenvilleHomeBuyer.com
864.506.2151

"The Most Sophisticated Home Buying System In The World"

 

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Comments (2)

Valerie Duncan Stewart
(Metro First Realty) - Oklahoma City, OK
Real Estate Agent-Broker, OKC, OK

Gene,

Can't tell you how many times a Pre-Qualified Buyer ends up NOT getting Pre-Approved due to a pertinent fact they failed to divulge to the lender. Soooo important to distinguish between the two! Suggested.

Nov 29, 2011 03:08 AM
Gene Donohue
Only Way Realty / UpstateHomeSeller.com - Greenville, SC
Flat Fee Service...Exceptional Results!

Thank you for "suggesting" Valerie.  In today's mortgage climate the sooner the buyer begins the process the better off they'll be.  I know there are many of us out there, clients, agents and mortgage brokers, that hold their breath until we get to closing table.

Nov 29, 2011 03:18 AM