Pre-Qualification Vs. Pre-Approval – What Gives?

mortgageYou’ve been looking at homes online for a while, when all of a sudden your dream home appears! You call your Realtor and they ask if you have been pre-qualified for a loan with a mortgage loan officer.

“What? All I want to do is look at a house.”

The mortgage loan officer will give you a price range that fits with your current income so that you know what you can afford. You don’t want to walk into your dream home and walk out not being able to make an offer.

Our friend and Senior Loan Officer with PrimeLending, Heather Torre tackles a common question amongst buyers – what’s the difference between getting pre-qualified or pre-approved:

I get asked this question numerous times a week: “What is the difference between a pre-qualification and a pre-approval?”  Over the years, my answer has changed.  Here’s the history…

When I first started lending back in 2002, I counseled buyers and Realtors alike to be sure they were getting a “pre-approval” before they got in the car and went looking at homes.  Back then, a pre-qualification was nothing more than an educated guess given by a Loan Officer taking basic information, punching numbers on a calculator and giving a hopeful client a number to go shopping with.  A pre-approval went a few steps further… the Loan Officer gathered pay stubs, tax returns, W2s, bank statements and pulled credit reports.  They then used factual data to produce the number thier buyers eagerly awaited – and could count on.

Today, with mortgage regulation changes, we have shifted the terminology a bit.  A pre-qualification now requires all of the same work and documentation that a pre-approval used to.  The term “pre-approval” has virtually disappeared as it now represents a loan commitment – basically a conditional commitment issued by an underwriter after review of the same documents a Loan Officer would have looked at, but they can go a step further and review any potential issues, as well.  In some cases, we do offer these – when there is something we just cannot approve on our own upfront, or feel that it warrants having the person who will do the ultimate approval review up-front.

Bottom line – regardless of the terminology, if your Loan Officer has not asked you for any documents nor have they pulled your credit, ask them to – or find someone who will go the “extra” mile (it’s their job!) and make sure that you can confidently go find the home of your dreams!

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