Mortgage Pre-approval vs Pre-qualification

Real Estate

Have you thought about buying a home? Then you must have already heard about a pre-approval or a pre-qualification letter. You don't get any attention as a buyer until you show people any of those documents. Now the questions is are they the same? Would having a pre-qualification letter qualify you as a possible buyer as having a pre-approval letter do? Are there any difference between the two? This article published on February 10, 2014 by Bill Gassett explains it thoroughly.


February 10, 2014 by Bill Gassett 

Types of Mortgage Letters


It is essential for you to know the difference between these two mortgage terms so you can plan appropriately when buying your first home.

From coast to coast, whether you are buying a home in Westborough Massachusetts or Englewood California, home sellers want to know you have the ability to buy their property.



Mortgage Pre-Approval Defined



1. A suitable property. The identification by the buyers of a suitable property they wish to purchase.



Issuance of a mortgage pre-approval letter from the lender implies that a credit decision has been made that will more than likely favor the completion of a mortgage commitment letter at some point shortly. In effect, the mortgage loan has been submitted to underwriting.

Please understand that a mortgage pre-approval letter is not a guarantee you will get the loan. It is, however, as close as you can get.


A Pre-Qualification Letter Defined


As a result of these circumstances, your ability to buy a house depends on upon your ability to borrow money. Because of this, you’ll talk with potential lenders before shopping for homes to determine your mortgage buying power and be able to consider different loan programs to decide which might be ideal for you.

“A mortgage pre-qualification” is an estimate of your borrowing power. It is, in effect, a statement from the lender putting forth that based upon your current financial circumstances, i.e., income, debt and credit levels, you will likely be qualified for a mortgage for a certain amount.

Receiving “pre-qualification” can be accomplished relatively simply by just a phone call to the lender. The lender may or may not run your credit report to confirm the details of your finances and get a clearer picture of the amount and terms you’ll qualify for.








The Mortgage Pre-Approval Advantage








The buyer loses their job before closing.
The buyer has misrepresented something in their mortgage application.
So Why Seek Pre-Approval?


The answers are tied to the fact that for taking the time to speak with a lender, buyers can get a more informed idea about how much they can honestly afford to spend on a home. They’ll have a better sense of which loan programs are best for them and which homes are in their price range.





As a top Real Estate agent, I will not even consider showing homes to a buyer around who is not pre-approved. There is entirely no point in showing homes that a buyer is not qualified to purchase. Home sellers are certainly not going to want to have unqualified buyers walking through their house either. This is a complete waste of everyone’s time.

Likewise, I will not accept a pre-qualification letter from a buyer putting an offer on one of my clients properties.


Other Useful Mortgage Resources:
Why a pre-approval is far more valuable to a home seller than a pre-qualification letter via
Five things to do before getting a mortgage pre-approval by Investopedia.
Things you should not do before buying a home via
Use these additional resources to further understand the difference between a pre-approval and a pre-qualification. Knowing why these two mortgage terms are not the same could put you in a better position to land the home you want!