Mortgage Pre-Approval vs. Mortgage Pre-Qualification | There’s A Difference

By
Real Estate Agent with Amanda Davidson Real Estate Group Brokered By eXp Realty 0225221517

 

 

Mortgage Pre-Approval vs. Mortgage Pre-Qualification | There’s A Difference

I was recently having a conversation with a first time home buyer and the question came up of whether there’s a difference between a pre-approval and a pre-qualification. The simple answer is yes there’s a big difference. Read this article to find out what the difference is and why it matters when you’re buying or selling a home.

 

What Is A Mortgage Pre-Approval?

For starters a mortgage pre-approval is not a guarantee you will get the loan but, it’s the closest you can get to that guarantee. There are still conditions such as locating a property, no change in your creditworthiness, and likely a satisfactory appraisal that will have to be met. The appraisal can vary in some cases. Aside from that, the pre-approval being issued means the lender has run your credit, verified your income, verified your employment, and reviewed your financial resources such as savings or retirement accounts.

 

checklist

 

What Is A Mortgage Pre-Qualification?

A pre-qualification means a lender has given an estimate of what you may qualify for based on information you have provided. The lender may or may not run your credit. Verifying income, employment, and financial resources is not part of a pre-qualification. It simply gives you an estimate of how much you can borrow.

 

What’s The Difference In Being Pre-Approved And Pre-Qualified?

Obtaining a mortgage pre-approval is a far more in-depth process. You will have completed a loan application and submitted financial documentation to your lender vs. just stating what your income is. The lender will run your credit and process the application through an underwriting process in order to then issue the pre-approval.

 

approved

 

Why Is A Pre-Approval Stronger In The Seller’s Eyes?

Having a pre-approval attached to your offer is stronger than a pre-qualification in the seller’s eyes because they then know a lender has obtained and verified your financials. It’s not just a ballpark estimate of what you may qualify for based of what you stated to the lender. If you have no idea what your financial situation is and are just starting to think about purchasing a home getting a pre-qualification is a good start. When you’re ready to buy and it’s time to start touring homes, a pre-approval is a must.

 

How Does A Pre-Approval Benefit A Buyer?

A pre-approval doesn’t just benefit a seller. It also benefits a buyer because it will determine what loan programs are the best option, the amount of your down payment, and give you an idea of what your interest rate will be. It doesn’t lock in your rate but, it does provide an estimate based off what rates are when it is issued.

 

It will also inform you of what the maximum sale price is that you are pre-approved for. That doesn’t mean you have to spend the max amount but, it gives you a baseline to work from so that you and your agent know what price range to look for homes in.

 

If you’re still not convinced that you need to get pre-approved vs. pre-qualified here are a couple closing thoughts.

 

Think about if you find a home you want to make an offer on and your agent finds out there are other offers on the home. If you haven’t been pre-approved yet it takes time to accomplish that step and in the meantime, the seller may elect to accept someone else’s offer. You could opt to submit an offer with your pre-qualification letter but, the odds of a seller selecting your offer over one that has a pre-approval attached are slim to none.

 

 

I advise my sellers not to even consider an offer that doesn’t have a pre-approval included with it. If I’m working with a buyer I will not show homes until my client gets pre-approved. Excellent agents who have a high level of expertise do the same. As a buyer when you are ready to buy a home getting pre-approved is one of the first steps. It not only shows sellers you’re serious it also sets you up for a successful purchase.

 

 

Posted by

 

Amanda Davidson Real Estate Group

 exp realty

 

 

      

 

AMANDA DAVIDSON  
l ASSOCIATE BROKER l  
l AMANDA DAVIDSON REAL ESTATE GROUP BROKERED BY eXp REALTY l

C  703.431.3755   |   O  703.988.3151  |   W  www.amandadavidson.com

A  20130 Lakeview Center Plaza #400 Ashburn, Va 20147




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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Rebecca Gaujot, Realtor® 02/10/2019 08:20 PM
  2. Andrea Bedard 02/12/2019 06:34 PM
  3. Gabe Sanders 02/18/2019 10:00 PM
  4. Will Hamm 03/23/2019 11:36 AM
Topic:
Home Buying
Location:
Virginia Fairfax County Alexandria Kingstowne
Tags:
mortgage approval
preapproval
home buying
home buying process
mortgage preapproval
prequalification
home buyer tips
home buying tips
mortgage prequalification

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Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Debb Janes EcoBroker and Bernie Stea JD you make a great point, fully vetted buyers really stand out from the crowd. It gives everyone confidence that the transaction won't have financing issues. Thank you for adding that. Have a great Monday!

Feb 11, 2019 05:37 AM #30
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Debe Maxwell, CRS WOW! Do not pass go do not collect $200 lol. I understand when consumers don't know the difference but, for an agent not to is concerning. She needs to sharpen her knowledge! Glad the lender was honest that he had very little info. A "rough prequal" made me laugh, no thank you!

Feb 11, 2019 05:39 AM #31
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Nina Hollander I hope she's all pre-approved now. She's lucky you're a pro and knew the right questions to ask to determine if she had what she needed. 

Feb 11, 2019 05:42 AM #32
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi thank you, that really means a lot coming from the expert - you! 

Feb 11, 2019 05:43 AM #33
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Gerald ( Jerry ) Santoro your buyer ready program is what every agent wishes they'd see every time. That's smart business and sets your borrowers apart. Thank you for your comment!

Feb 11, 2019 05:44 AM #34
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Jan Green a lender like that is priceless. You've developed a wonderful team to help you assist your clients with a seamless sale or purchase. Surprises when it comes to financing are never what we want!

Feb 11, 2019 05:45 AM #35
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Brian England good for you! I hope they listen, you are giving them the right advice and it will serve them well when going through the buying process.

Feb 11, 2019 05:46 AM #36
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Will Hamm you're welcome to share it anytime. Thank you!

Feb 11, 2019 05:47 AM #37
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Bruce Kunz I love those and think it's such a smart idea. I wish more buyers/lenders would go that route. Have a great week!

Feb 11, 2019 05:48 AM #38
Rainmaker
1,851,898
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Amanda - this is an excellent explanation and congratulations on the well deserved feature.

Feb 11, 2019 05:48 AM #39
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

John Wiley that doesn't sound fun at all. Definitely a mess! Makes you wonder what the buyers didn't tell the lender upfront that caused them not to qualify. Never a dull moment!

Feb 11, 2019 05:49 AM #40
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Marte Cliff I completely agree. It's just plain incompetence on an agents part to not know the difference. 

Feb 11, 2019 05:51 AM #41
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Endre Barath, Jr. haha that's perfect and very accurate. It truly isn't worth the paper it's written on.

Feb 11, 2019 05:52 AM #42
Rainmaker
5,271,847
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is excellent advice to share with prospective home buyers.

Feb 11, 2019 05:59 AM #43
Rainmaker
703,762
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

Great blog post Amanda! Clear, precise, and well put together. Sharing! 

Feb 12, 2019 06:22 PM #44
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Andrea Bedard thank you so much!

Feb 13, 2019 04:57 AM #45
Rainmaker
746,757
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Good post with excellent information. With low inventory it is so important to make your offer and your position as strong as possible. I am also finding so many lenders have special programs as well, so buyers, especially first timne buyers, need to check with different lenders to make sure they are getting the best deal.

Feb 17, 2019 09:26 AM #46
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Nick Vandekar, 610-203-4543 you can say that again on the low inventory. It's extremely competitive here too and you're right, buyers need to make their position as strong as possible. Special programs can really make a difference for first-time buyers, great point. 

Feb 17, 2019 04:12 PM #47
Rainmaker
285,678
Dave Rosenmarkle
Highland Realty - Arlington, VA
32 years of providing fully satisfying service!

Thanks for the post. Probably 25% of the offers I receive have "pre-qualification" letters and Realtors who either don't know or don't care about the difference.

Apr 08, 2019 06:12 AM #48
Rainmaker
1,516,253
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Ashburn, VA
Alexandria Virginia Homes For Sale

Dave Rosenmarkle for some reason I've seen it more in the past year than ever before. They have their purpose but, it sure isn't when making an offer. 

Apr 08, 2019 09:34 AM #49
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