What’s the Difference Between a Mortgage Pre-Qualification versus Mortgage Pre-Approval?
While many real estate agents and their clients use the terms pre-qualification and pre-approval interchangeably, they are very different in practice. Pre-qualification involves providing information to the lender and in return getting a letter stating the maximum loan amount that the home buyer should be able to afford. On the other hand, pre-approval involves providing documentation to support that information, as well as passing a credit check.
Homebuyers complete an entire application package, supplying pay stubs and / or tax returns, bank and investment account statements, and perhaps other paperwork like divorce decrees, business licenses, canceled checks and more. The whole thing is actually processed and underwritten, and if approved, the borrower should be able to purchase any property that meets the lender’s requirements.
The road from mortgage application to mortgage approval can be blocked by many unexpected problems, from errors on the credit report to questions about that second job or a bounced check showing up on a bank statement. Going through the pre-approval process allows mortgage applicants to resolve these issues without the added pressure of being in escrow with a closing date hanging over their heads.
It’s very important and time saving to go through the process of getting pre-approved vs. pre-qualified, saves a lot of time and potential stress. Plus, the Seller’s agent and the Seller will be a lot more inclined to take your offer seriously knowing you are educated, prepared, have been scrutinized by a mortgage lender and serious enough to buy their home.
Additionally, Arizona contract law states that a pre-approval letter must be submitted with all Purchase Contracts or delivered within 24-hours. I don’t like to wait 24-hours. I like to submit an entire beautiful package that I put together.
Put yourself back in the seller’s shoes for a moment. Wouldn’t you want buyers to have a letter like this if you were selling your home?Let's Get Social: