Pre-Qualification? Pre-Approval? What's the difference?

By
Real Estate Agent with Homebuyer Representation, Inc. DRE# 5467433

Pre-Qualification vs. Pre-Approval

Pre-Qualification is NOT the same as Pre-Approval.

Pre-qualification for a mortgage loan is simply a mathematical look at the buyer's stated income and debts that produces a maximum home price the buyer could afford. There is no checking of credit and no verification of any of the information provided by the buyer.

A loan pre-approval won't be provided from a lender until a buyer's credit has been run, the buyer has been evaluated for credit risk, their financials have been looked at more closely, and the lender is confident that everything should go through with the buyer's loan provided normal follow-up conditions are met (such as income verification, property appraisal, etc.). For these reasons, a pre-qualification is much weaker than a pre-approval. It does not add much, if any, strength to a buyer's offer.

Because many sellers have been burned by buyers who are simply "pre-qualified", whose loans are later denied, more and more sellers are asking that pre-approval letters be sent with a buyer's offer. (And some sellers will not even show their homes to buyers who are not pre-approved for financing.)


Buyers should get Pre-APPROVED before writing an offer on a home.

There are many benefits to getting a pre-approval letter before even looking at homes. Certainly at the point of writing an offer, having a pre-approval letter in-hand is ideal. 

  • Getting pre-approved for a home loan helps a buyer know in advance how much home they can purchase.
  • A pre-approval builds confidence (to both buyer and seller) that the loan will go through.
  • A pre-approval makes your offer much stronger and more attractive to sellers and their agents.
  • In a multiple-offer situation, the difference between submitting an offer with a pre-approval letter vs. a pre-qualification letter (or no letter) could determine whether or not the buyer gets the home.
  • A seller may accept a lower offer from a pre-approved buyer. (Especially if a previous offer from a pre-qualified buyer failed.)
  • Perhaps the most important reason for getting pre-approved for a loan is that the pre-approval adds credibility and strength to the buyer's offer and puts the buyer in a stronger position to negotiate more aggressively.

 Remember: Pre-Approved, not Pre-Qualified.

Homebuyer Representation, Inc. - Exclusive Buyer Agents

  • Do you have excellent credit?
  • Do you plan to purchase a $300,000-$800,000 home within 60 days?
  • Do you have a good down payment, or are you paying cash for your next home?
  • Do you want an agent on YOUR side throughout your transaction?
  • Do you simply have questions about how things work?

Don't work with just any agent. Get YOUR OWN agent!

Call us at (801) 969-8989 or contact us today via the link on this page for a free consultation.

©2013 Homebuyer Representation, Inc. - "The Real Estate Agents on the Buyer's Side" TM  All Rights Reserved

Salt Lake City, UT - Exclusive Buyer's Agents (EBAs)

For more information, or for information on finding the best buyer's agents nationwide, visit GetYourOwnAgent.com

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Home Buying
Groups:
RealtorsĀ®
Exclusive Buyer Agents
Exclusive Buyer's Agents (EBAs)
Buying A Home
Tags:
buyers
buying a home
loan
financial
preapproval
benefits
prequalification
letters
negotiating
offer
risk
strength

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
2,784,063
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Benjamin - Thank you for sharing an excellent blog about the difference between pre-qualification and pre-approval.

Sep 20, 2013 09:29 AM #1
Rainmaker
252,068
Benjamin Clark
Homebuyer Representation, Inc. - Salt Lake City, UT
Buyer's Agent - Certified Negotiation Expert

Thanks for visiting John.

Sep 21, 2013 04:33 AM #2
Rainmaker
373,295
Dana Hollish Hill
Hollish Hill Group, KW Capital Properties - Bethesda, MD
Lead Associate Broker

It drives me crazy when people interchange these terms as if they are the same thing. Thanks for spelling out so clearly. 

Sep 25, 2013 11:24 PM #3
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
252,068

Benjamin Clark

Buyer's Agent - Certified Negotiation Expert
Contact me now to get started or to ask any questions you have
*
*
*
*
Spam prevention

Additional Information