Pre-Approved Versus Pre-Qualified

The greatest leverage a buyer has is a “cash deal” and the buyers who do not get pre-approval have lost this leverage. Getting pre-approved is arranging financing before actually buying a residential property.

Many real estate buyers make the deadly mistake of making an offer on their desired house or condominium first and arranging financing later. Doing so can lead to complications, such as losing out on the deal and losing your earnest money deposit because the loan fell through.  Additionally,

Talk to at least three different lenders

Anyone who wants to buy a home today should contact his/her lender first. Finding out how much loan you can reasonably expect to qualify for is a good step toward the goal of homeownership and a letter of pre-approval can be the mechanism that makes it happen. There is a distinct difference between a letter of pre-qualification and a letter of pre-approval and it is important that you be aware of this distinction. 

A fact that is often ignored by real estate buyers is that interest rate and terms of the mortgage are just as important as the property's price. A bad loan can wipe out any savings gained in negotiation. Buyers may not have enough time to comparison shop for the best mortgage after an offer is accepted.

 Pre-Qualification

Pre-Qualification means there have been loan calculations made that show how much you "may" be able to borrow. While pre-qualification can shorten processing time for home loans, indicating how much house you can afford, and providing some leverage in bargaining power, it doesn't necessarily guarantee that such a loan will, in fact, be made by the lender.   TOP

 Pre-Approval

Pre-Approval means you actually have a loan waiting, subject only to finding the home and appraisal at the sales price. The "pre-approval" letter represents an actual commitment on the part of the lender. In order to secure such a letter it is necessary to complete a formal loan application and have your credit, salary, and bank funds checked. If the loan is a good investment, the lender will issue a pre-approved letter that provides a commitment for a limited period of time, subject to a satisfactory property appraisal and title search.  TOP