What’s the Deal with Pre-Qualification and Pre-Approval Letters?
You may have heard the terms “pre-qualification” and “pre-approval” used before, but are wondering if there is any difference between them. In fact, these two terms mean very different things in the real estate world, but both can be useful tools in your home-buying process. A pre-qualification is a very preliminary assessment completed by a lender based upon information supplied by the borrower. Most lenders do not need to pull your credit to issue a pre-qualification letter. Because no credit check or income verification is performed, a pre-qualification letter won’t get you very far in the marketplace. What it DOES do, however, is let you know how much money you can afford to borrow. Armed with this knowledge, you will be better equipped starting your home search, because you will not waste time chasing after homes you ultimately cannot afford.
A pre-approval, on the other hand, is issued after the lender has run a credit check and verified the borrower’s income and assets. Because of these extra steps, a pre-approval letter is an important document that shows sellers and their agents you are a serious buyer who can afford the property. If your offer will include a financing contingency, providing a seller with a pre-approval letter relieves some of the seller’s anxiety that you may be denied a loan. During a multiple offer situation, a strong pre-approval letter can sway the seller’s decision in the pre-approved buyer’s favor.
If you want to discuss the pre-approval or pre-qualification process with a seasoned real estate advisor, give Thomas Burns a call today at 202-838-SELL!