What is the Difference Between Pre-Qualification and Pre-Approval?
While a pre-qualification simply reviews what you have provided as your income, assets, and debt, a pre-approval means that all of this information has been reviewed in-depth and the bank is confident that you have the ability to pay back the amount they stipulate. All that remains is for them to verify that loan amount can be used for the property specified.
Why Obtain Loan Pre-Approval?
A Pre-Approval gives the seller assurance that the buyer can execute the contract and obtain the financing necessary to purchase the home. The seller knows the buyer has been adequately vetted and the bank has confidence in their ability to pay back the loan. Listing agents will advise their seller against accepting any offer not accompanied with a pre-approval.
It also allows the buyer to know what they qualify for and to determine what they are actually comfortable with.
What is Involved in Loan Pre-Approval?
First, select a lender or shop around with different lenders. Different lenders have different products that may be suitable for unique situations. If you need help finding a great lender, I can provide you with preferred lenders that I trust, have strong rapport with, and whom I have confidence in.
You will be asked to supply pay stubs, W2’s, bank statements, additional documents to verify other debts and assets, and agree to a credit check. The pre-approval can be obtained relatively quickly depending on how fast the buyer provides this information. The lender will then issue a letter stating the buyer is approved to purchase a home up to a specific amount and usually details the loan type(s). We will provide this information to the seller when you are ready to make an offer.