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Pre-Qualified, Pre-Approval:
What's The Difference? |
The two terms are often times considered interchangeable, however they mean very different things.
Pre-Qualification
Getting pre-qualified is simply getting an idea of the price range you can afford. This is based on your stated income, assets, and liabilities. With a pre-qual, your information is not verified and your credit has not been reviewed. Most borrowers do not bother with a pre-qual and opt instead to get a pre-approval. This serves to greatly strengthen their position when house shopping. Many home sellers will not even consider an offer that they receive which is not accompanied by a pre-approval.
Pre-Approval
A pre-approval is quite different from a simple pre-qualification. When doing a pre-approval, a credit report will be pulled and reviewed, and your information "ran through" an automated underwriting system for approval. The approval that we get back from the automated system will detail the information that the lender will want to verify to issue a final approval. At this point a pre-approval can be issued "subject to" receipt of those items. At this point you will know that you can be approved for the desired loan amount. This will also show the seller that you can obtain financing for the property. Keep in mind that this is not a loan commitment and if you cannot provide satisfactory verification of your income, assets or other requested information the lender may not approve the loan.
The pre-approval process can be a little different for non-conventional financing. There is no automated underwriting system available that lenders use for non-conventional financing. Often times we need to "package" the loan and send it to the lender to be underwritten. In many cases we can still issue a pre-approval based on our review of the your information as it compares to the lenders guidelines. Any pre-approval we issue will still be subject to final review by the lender.
We recommend getting pre-approved before you start home shopping. This will allow you to be certain of the loan program and amount that you can be approved for. Also, if there are any inaccuracies on your credit report this will catch them early enough in the process to correct the mistakes before they cause a problem. Pre-Approvals are Fast, Easy and Free. Get Pre-Approved Now
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