There is a lot of confusion when it comes to getting a mortgage these days.  Realtors ask are you Pre-Approved or are you Pre-Qualified.  So what’s the difference?  Aren’t they the same thing?  No they are not.

Good listing agents will coach their sellers on the differences and here’s why.

Pre-Approval:

The borrower has spoke with a loan originator on the phone.  The Loan Originator, or LO asks a series of questions such as, what is your annual income, what are your debits, credit cards, car payments, current rent or mortgage, how long have you been on your current job etc.  None of which is verified.  

Based on this conversation the borrower is issued a Pre-Approval letter.  Usually the letter will say something to the effect.  Example:  I have spoken with Mr. Bob Jones and based on this information we have issued a pre-approval for $200,000 loan to purchase a home.

This information has not been verified.

  1. A Credit report 
  2. Income 
  3. Debt 
  4. Current job history

Pre-Qualified:

The LO has requested and received the following from the borrower.

  1. 2 years tax returns, filed and stamped
  2. Last 4 months of pay stubs
  3. Last 2 years of W-2
  4. Credit is pulled
  5. Employment history is verified

Then the file is sent to an underwriter and the underwriter looks over the file to be approved and it is sent back to the LO.  Now the LO can issue a Pre-Qualification letter.  Saying this person is qualified and has underwriter approval to purchase a $200,000 home.

As a home seller looking at two offers one with a Pre-Approval letter and one with a Pre-Qualification letter.  Which would you choose?

As Always you can give me a call if you need financing for a home loan.  I can recommend a few outstanding people that will do an wonderful job for you.