Pre-Qualification vs. Pre-Approval
They both sound the same, but very different! When we receive an offer on our listings and see a Pre-Qualification form, we always ask the buyer's agent to please send us a Pre-Approval. A Pre-Qualification is is not based on the buyer's true buying power or their true financial capability, but a loan agent's OPINION that the buyer will be able to obtain financing. Buyers who are pre-approved are taken more seriously, and if in a multiple offer situation, a buyer may not get the chance to submit a Pre-Approval and strengthen their offer! We do not expect a buyer to know this, but a knowledgeable buyer's agent should!
Virtually anyone can achieve pre-qualification status. Pre-approval, on the other hand, signifies that the application has been taken through a rigorous procedure. Pre-approved buyers enjoy these benefits:
1. If you make an offer on a home and then apply for a loan, you are at the lender’s mercy. He sets the interest rate and points, aware that you do not have time to shop around.
2. Pre-approval saves time spent looking at houses you can’t afford.
3. If you rely on your lender to tell you what you can afford, you may end up with a high mortgage payment. Most people can qualify for more than they feel comfortable paying.
4. Having a pre-approval letter from a lender gives you an edge when multiple offers have been made on a house.
5. Pre-approved buyers can generally close escrow more quickly. Once you submit your credit package, most of the legwork has already been done.
Preparation is key in starting your home search, and the Pre-Approval is your second step in starting your home search. Your first step is calling us so we can go over the home buying process in detail. Knowledge is Power!