Pre-Qualified vs. Pre-Approved
What's the Difference?
Getting pre-qualified helps you determine how much home you can afford, based on specific financial information you share with a lender. The lender does not verify this information, and consequently there is no guarantee you will qualify for the loan amount. Getting pre-approved requires that the lender verify your financial information, and does serve as a commitment to lend a specified amount based on that verified information. There is normally no cost involved in obtaining a pre-qualification however a lender may charge a fee to provide a pre-approval letter. A pre-approval does provide you significant buying power with a seller who recognizes you will be approved for a loan. Talk to your Patterson-Schwartz Sales Associate if you are in doubt about which way to go. You may also contact Skip Smith who's a senior loan officer with Fairway Mortgage in Newark Delaware by calling 302-733-7055.
What's a pre-qualification?
Pre-qualification is an informal discussion between borrower and lender. The lender estimates the amount that you can borrow based solely on what you tell them about your income and assets. The lender does no verification and is not bound to make the loan when you're ready to buy. On the other hand, loan pre-approval is based on documented and verified information regarding your employment, your income, your liabilities, your assets and the cash you have available to close on a home purchase.
How is a pre-approval better?
To a seller, a lender's pre-approval letter is considerably stronger than a pre-qualification letter. If a seller knows your financing is secure, your offer is stronger. Pre-approval also gives you peace of mind as you shop for a home, knowing that you will qualify for the proper mortgage amount.