Pre-qualification vs. pre-approval: does it really matter? In the competitive world of home buying – unequivocally the answer is yes! Let’s dive into the topic to learn the differences and understand why it matters.
Pre-Qualification vs. Pre-Approval:
A pre-qualification is more of an estimate. You can plug numbers into a calculator and receive an estimated amount you will likely be able to borrow. There are no credit checks which makes this more of a hypothetical than a commitment. On the pre-approval side this resembles a financial physical of sorts. Here, your lender will look at income, assets and liabilities, debts, recurring payments (car(s), student loan(s), etc) and run a credit check. Typically, they provide commitment letters that indicates an estimation that a loan for the stated amount is likely. In both instances – neither are a guarantee of a mortgage – but the pre-approval has more basis and strength.
What Do Sellers Look For?
Typically, sellers look for the strongest possible offer. Cash remains king and typically is the strongest way to present to a seller. There are times that sellers will look beyond cash customers. In that case, it is important to present the strongest possible offer. A strong offer to a seller indicates the highest chance the deal will come to a close without issue.
While a pre-qualification letter may look appealing – remember, there have been no verifications – which means that ultimately there could be underlying issues. In the case of a buyer with a pre-approval letter – while there are no guarantees – there is a higher likelihood that with proper vetting of the mortgage requirements being met. If a seller is faced with competing offers – from a pre-qualified buyer or a pre-approved buyer – it is likely that they would opt for the pre-approved buyer’s offer (assuming all other facets of the offer are equal).
Pre-Qualification vs. Pre-Approval: Does it Really Matter?
Buyers wanting to be successful at home shopping would be wise to present as the strongest possible option. I recommend to house hunt with a pre-approval letter vs. pre-qualification. With that in mind, if you have questions on pre-qualification or pre-approval or would like to arrange a consultation, please contact me on here! You can also reach me on my other pages, like on Instagram. Alternatively, if you are in need of a lender contact – please advise as I have some great contacts to present for your consideration.