The difference between a pre –qualification and pre-approval is the documentation provided to the lender. A pre-qualification, simply means, the information provided from a borrower has not been verified. Meaning, the basic income, asset, and debts have only been discussed verbally and the loan terms are an estimation based off this information.
A pre-approval requires a completed loan application, plus a full review of credit, income, assets, and liabilities. Once a pre-approval is completed the borrower knows exactly home much of a home they qualify to buy. The lender is now able to provide the borrower with a pre-approval letter, confirming that the borrower has been pre-approved and is ready to make an offer on a home. Most realtors, will want to verify you have obtained a pre-approval before making an offer on a home.
Obtaining a pre-approval letter will give you the information you need to make a smart financial decision. Plus, give you the confidence to move forward in purchasing a new home.