Though the terms may sound similar they are in turn, very different. When a customer is prepared to buy a home they sometimes contact a lender about getting qualified to buy. Typically, the loan officer will pre-qualify the customer. Getting prequalified is simply giving your loan officer your financial picture either in person or over the phone. This includes your income, overall debts, and total assets. Then they come up with a loan amount you can qualify for. The key word there is “can”. The loan amount “can” change based on pre-approval. The pre-approval process is not only getting your financial information, but proving it with documentation and pulling a credit report to check creditworthiness. An underwriter has to take a look at all your documentation and credit reports and analyze it to decide if he or she will give the customer a yay or nay on the prequalified loan amount. Once pre-approved up to a certain loan amount, the customer can now shop comfortably knowing if they find a house within the price range, the deal can be done. If a customer shops for a house when they have only been pre-qualified, they can certainly be wasting their time looking at homes that are out of their reach in the first place. Then hearts are broken because you found the one house that is perfect for you…. BUT it’s priced too high. Lastly, having a pre-approved loan gives the buyer more leverage when putting in an offer. If a seller receives more than one offer and your offer is the only one with a pre-approved loan, then your offer is more likely to be accepted over another. No seller wants to wait for a buyer to be approved for a loan and then have it fall apart in the end. It is again a waste of time. So, remember, if you are serious about purchasing a home, getting pre-approved first is the way to go. It’s a great time to buy right now while interest rates are still very low and tax credits are still in place. Time is of the essence!
I look forward to being of service to you!