Many home buyers don't realize that it's best to get pre-qualified for a loan rather than pre-approved. There's a big difference between pre-qualification and pre-approval when it's time to get serious about buying a home.

Sometimes understanding the distinction can make the difference between getting the home you want at the price you want it for and having to settle for something less. One gives the seller a great deal more confidence in your ability to close escrow, which is the purpose of both types of documents.

What is mortgage pre-qualification?

Pre-qualification is easier to get than pre-approval, and therefore less meaningful when you're shopping for a home. Pre-qualification doesn't give the seller as much of a sense of security that you are able to close the loan.

Pre-qualification is similar to those credit card offer you get saying you have been pre-qualified to receive their credit card, but you still have not filled out an application t get approved.

You are pre-qualified for a mortgage when you get a letter from a lender saying that you are qualified to take out a mortgage loan. It is better than nothing, but carries less weight than a pre-approval, because the lender is simply saying that, on paper, you are qualified. It is not verified, and you have not filled out all of the necessary forms at that point to know whether you are approved.

What is mortgage pre-approval?

Pre-approval is when you have actually applied for a mortgage, received your credit report, filled out your application, etc. Employment and income have been verified, making a seller more confident in your ability to close on the home. This is the ideal situation.

If you want the smoothest possible home-buying experience, I recommend that you spend some time getting pre-approved, rather than just pre-qualified. Please give me a call if you'd like more help on this subject.

And go for pre-approval right from the start!