Pre-Approved? Pre-Qualified? Ethan Gregory, REALTOR, helps to clear up the confusion when it comes to mortgages.

In the real estate world, we throw around terms like “pre-qualified” or “pre-approved” all the time and use them interchangeably. But in reality, there is a good difference between the two in regards to a mortgage.

A pre-qualification letter is a statement from a lender indicating their ability to lend mainly based on a conversation about your finances and intent to purchase a home. There is no credit report or underwriting of the loan with a pre-qualification letter.

When making an offer on a home it helps to have a pre-approval letter and not the pre-qualification letter. The pre-approval letter indicates that you have found a lender and secured financing with them by going through the underwriting process. That means you have supplied bank statements, tax returns, pay stubs, etc. to show your ability to purchase along with a credit report. Essentially, as long as nothing changes in your financial situation before you purchase then all your lender would need to do is update financial information and complete the appraisal in order to give you the loan approval.

In today’s competitive marketplace it really helps to make an offer on a home with a pre-approval letter. This shows the seller that your finances are in order and gives them one less worry when it comes to choosing your offer.

Take the extra step when searching for a lender and get pre-approved so you can really know what you can afford when looking for a home

Happy house hunting!