Here are the differences between a pre-qualification and a pre-approval.

With interest rates being so low, we have a lot of homebuyers out there looking to buy and a ton of homeowners looking to refinance. Before you get started, it’s extremely important to speak with a lender to find out what you qualify for. There are two types of qualifications: a pre-qualification and a pre-approval.

A pre-qualification is more of a guess, an estimate. You chat with a lender, verbally telling them what your monthly recurring debt and income are. Based on those two things, they will give you a pre-qualification, which is more of a ballpark estimate of what you can afford. This is mostly used by casual buyers.

“A pre-approval makes you a much more serious buyer in the eyes of sellers.”

A pre-approval takes things to the next level. It’s a thorough examination of your credit and financial documents. You go online, fill out a quick application, then you’ll be asked to send over things like bank statements, pay stubs, and your last few years of tax returns. They’ll dive in and provide you with a pre-approval that comes complete with a pre-approval letter that tells you how much you can afford.

If you are serious about buying a home and want to make a move on something quickly, a pre-approval letter is going to help you stand out way more than a pre-qualification letter.

If you have questions about pre-qualifications, pre-approvals, or anything else related to real estate, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.