Pre-Qualification vs Pre-Approval

If you’ve heard the terms “Pre-Qualification” or “Pre-Approval” you might be wondering, what is the difference?

What’s Pre-Qualification?

Think of pre-qualification as the first step in the home buying journey. You share information about your income, assets, and credit score with the lender. It’s a preliminary assessment based on what you’ve told the lending agency.

What’s Pre-Approval?

Pre-approval is a little more serious. In this step, you will provide solid evidence to back up what you’ve said during pre-qualification. Documents like pay stubs, W-2s, bank statements, and identification are submitted for verification to the lender. Pre-approval is a thorough financial background check to ensure you’re all set to make that big purchase.

The key difference? Pre-qualification leans on what you’ve said, while pre-approval is based on what you’ve proven. For lenders like us, even in pre-qualification, we prefer to cross-check credit scores to catch any surprises early on in the homebuying process.

The real magic happens when you gather your pre-approval. It’s the golden ticket, assuring you and your real estate agent that your financials are in order. This means fewer hurdles during the closing process.

Remember, not all lenders treat these stages the same. Some might have a stringent pre-qualification process, almost mirroring a thorough pre-approval. Others might offer a pre-approval that’s comparable to a basic pre-qualification, relying more on what’s said than what’s substantiated.

The key takeaway? Always clarify with your lender what their pre-approval entails. Are they holding the documents or just going by your word? The goal is to ensure that your pre-approval is solid, backed by documents, putting you in a winning position when you’re aiming for that dream home.

Take care!