Pre-Approval Versus Pre-Qualification: What’s the Difference?
Did you ever participate in show-and-tell as a kid in […]
May 19, 2021
Home/Mortgages/Pre-Approval Versus Pre-Qualification: What’s the Difference?
Did you ever participate in show-and-tell as a kid in school? In case you’re one of the few who never did, the general concept is easy to understand. In short: you would bring an object from home, hold it up in front of the classroom and talk about it. Simple enough, right? So it also is with a mortgage pre-approval. Along with telling a mortgage adviser about your financial situation, you show them documentation that verifies it. However, with a mortgage pre-qualification, there’s a lot of telling but little, if any, showing.
Bottom line: a mortgage pre-approval carries more weight than a pre-qualification. But let’s delve a bit deeper.
Generally-speaking, a pre-qualification is a nice thing to have because it gives you an idea of how much home you might be able to afford. However, this is based almost entirely on what you tell a mortgage adviser about your your income, assets and debt. Without anything in writing or any kind of formal verification, your lender is merely estimating the size of the loan for which you might qualify.
A pre-approval, on the other hand, requires you to provide your mortgage adviser with bank statements, pay stubs, employment history, credit history, a summary of your monthly payments, and more. The lender also checks your current credit score. Because you’re showing and not just telling, a mortgage pre-approval carries significantly more weight than a pre-qualification.
Unlike with a pre-qualification, someone who is pre-approved receives a letter from a lender stating the exact amount for which they can expect loan approval. While a pre-approval doesn’t 100% guarantee this loan, it’s the next best thing to formal approval — which comes later in the homebuying process. Pre-approval is therefore the No. 1 way to show a seller you’re serious about a home purchase. To learn about Fairway’s new Certified Pre-Approval option, click here. This ensures buyers up to $7,500 in reimbursements if their loan isn’t ultimately approved for an unforeseen reason.
Here’s a quick 101 from Fairway of the Carolinas Branch Sales Manager Trevor Higgins on pre-approvals and their importance.
For more information on the difference between a mortgage pre-approval and a mortgage pre-qualification, check out our company’s FAQ page. You can also contact us today at Fairway of the Carolinas. Any one of our highly trained mortgage advisers will be glad to assist you. We hope to hear from you soon!