Buying or selling a home can be stressful, even in normal times. Right now, when the housing market is moving at a frenetic pace, both buyers and sellers are making quick decisions and are feeling
The Difference Between a Pre-Qualification vs. PreApproval
Dated: May 20 2021
There are plenty of real estate terms used in transactions. Needless-to-say it can be confusing for both buyers and sellers trying to navigate the process. The home loan process might feel overwhelming and difficult to understand. Both buyers and sellers find terms like “PreQualification” and “Pre-Approval” used interchangeably, it’s no wonder they find themselves wondering how to proceed.
The first step in obtaining a home loan is to meet with a lender and discussing financing options. The lender will discuss income, job stability, debt and credit. Once they have performed a basic review of the qualifications and run credit, they will issue a Pre-Qualification Letter to the potential buyer. This letter will identify the maximum sales price, down payment requirement and basic terms of the loan, such as interest rate. The Pre-Qualification letter is used to provide evidence that the buyer has been reviewed by a lender who is vouching for their ability to obtain a loan.
A Pre-Approval is quite different. In this case, the lender collects all the necessary information and proof of eligibility and has it reviewed by the lender underwriter for approval. A Pre-Approval letter is almost like shopping with cash, the only remaining piece of the puzzle is the property they are buying.
In our highly competitive market, it is strongly recommended to be Pre-Approved, prior to house hunting, to ensure that your offer will be taken more seriously. Please reach out to us for some excellent lender recommendations!
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