We often have conversations with our clients regarding the difference between a pre-qualification and a pre-approval. Some clients believe that these are the same thing. It is important to know that just because you are pre-qualified does not mean that you are pre-approved.
The process to get pre-qualified is extremely simple. You have short conversation with your lender about your income, credit, and assets. At this point credit is not pulled, only verbal information is exchanged. The result of this will allow you, the borrower, to know what kind of housing payment you could be qualified for. It is important to note that that number is not a definite. This is because the lender if going off of all verbal information that you are providing to them, nothing is being confirmed. Due to that a pre-qualification does not mean the same thing as a pre-approval.
The pre-approval process is also fairly simple, but is more involved than the pre-qualification process. During this process, information regarding your income and your assets will be collected. Your credit will be pulled by your lender and then uploaded into an automated underwriting system that will grade your overall risk for the loan. When this process is completed, you will have a more accurate idea of what you can afford, and you will receive a pre-approval letter for that amount. You do not get a similar letter during a pre-qualification. This pre-approval letter will give you purchasing power and you will be able to confidently make an offer on the house that you find that you love.
I hope this paints a clear picture about the difference between a pre-qualification and a pre-approval.
If you have any questions please call or email me!