The Difference Between a Pre-Qualification vs. PreApproval
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. Let’s check out some of the differences below! :)
The first step in obtaining a home loan is to meet with a lender and discussing their financial situation. 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 PreApproval letter is almost like shopping with cash, the only remaining piece of the puzzle is the property they are buying.
So what does this mean for you? As a buyer, you definitely want a pre-qualification from a lender before you start shopping for homes. In Durham and Raleigh, the supply of homes is not enough to keep up with the number of interested buyers. This means there are often multiple offers on a single property. The seller is probably not going to accept an offer from an interested candidate if they don’t know if they can even get the loan. It is in your best interest to get pre-qualified ahead of time, or find a lender who will go ahead and take the extra steps to get you pre-approved before you even look for homes in the RaleighDurham area! This saves both parties a lot of stress knowing the loan isn’t going to have as many potential issues in the process.
If you are interested in getting started on your home shopping or selling journey, Zach and I would love to help! Give us a call sometime! (919-730-0777)
Cindi is a born and raised Durham native. She is a former elementary school teacher turned realtor, now working at Movil Realty. Cindi is excited to help others find their home here in the triangle.