What is a loan “pre-approval” versus a loan “pre-qualification”?

What’s the difference between a loan “pre-approval” and a “pre-qualification”? And why does it matter which one I get from my lender?

There is a big difference and it could be the reason you get the home you love or the reason you lose it in a bidding war.

A pre-approval to me means that you have had your credit checked, you’ve provided the income documentation requested by the lender and you’ve been approved through their actual underwriter. All you need now is a home so an appraisal and title work can be done. You are ready to go!

Alternatively, a pre-qualification to me means you called a lender, told them a little bit about your financial situation and they pulled your credit and said you look good to go. It doesn’t mean much.

Getting the real “pre-approval” will set you apart when the seller has 5 offers and yours is the only one that has been fully approved other than the appraisal and title work.

Getting this pre-approval is consistently the piece of advice that I give that is most often ignored by my buyers and I think this is the one big thing they control in the buying process.

So who do I contact for a loan pre-approval? Chat with your agent about your situation and they can help guide you to the best lenders. You want someone that you have a relationship with, or that your agent has a relationship with in case there is a problem. You also want someone who is experienced with the situation at hand. For example, if you want to do a VA loan get someone who knows VA loans. If you want to buy new construction make sure you get a lender who knows how that works through experience.

We can help, let’s chat about your situation and we can provide you a few lenders we know, like and trust even if you aren’t using us as your agent.

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