Here are the differences between a pre-qualification and a pre-approval.
Before you go out looking for a home, one of the first steps is to attain pre-approval from a mortgage lender. Today Ryan Paquin, the branch manager of First Home Mortgage in Crofton, is here to explain more about the difference between a pre-qualification and a pre-approval. Ryan has been in the mortgage business for 20 years, and he’s seen many people ask for different things when they’re preparing to write an offer on a property.
If you want to write an offer, you need a pre-approval letter. Some will only submit a pre-qualification, but it’s a less rigorous investigation into your credit and financial profile. Pre-qualifications don’t verify documentation or ask for it, they just ask you a few questions over the phone, maybe have you fill out an application online, and pull your credit.
When you submit an offer, most listing agents and sellers want to know how serious and qualified you are to buy the home because they’ll remove the house from the market and reserve it for you. So if your credit or finances haven’t been approved by a lender, they don’t know whether you’ll get qualified for a loan or not.
So with a pre-approval, a lender verifies all documentation including tax returns, W-2s, pay stubs, bank statements, credit profile, any large deposits, and whether you receive or pay child support or alimony; it’s a thorough investigation of your credit and finances. So when a listing agent calls the lender, they can say they have verified all your documentation and you indeed qualify, and they have everything they need to prove it. The pre-approval letter states all this for you to submit with your offer. They’ll even run the loan through an automated underwriting system and in some cases get your file in front of an underwriter before you go under contract.
Your offer is much stronger with a pre-approval letter, but not so much with a pre-qualification. In the current competitive marketplace, a pre-approval letter is a must for any buyer who’s seriously looking for a home to buy.
If you want to get pre-approved, call or email Ryan and his team. They’d love to speak with you. If you’re looking for a home or have any questions, contact me via phone or email. I would be glad to assist you in finding a great home or help you get the process started.