Pre-Qualify vs. Pre-Approve: What’s the Difference?
It’s important to understand that pre-qualification and pre-approval are not the same and knowing which option you should go with can make a big difference in a competitive real estate market. The right choice will help you get your dream home, while the wrong one will cause you to lose it to another buyer.
If you are pre-qualified, it means that a lender has been informed of your income, assets, and debt, which they will use to determine the amount you will likely be approved for. The amount is based on your current financial situation, but you must remember that this is in no way a guarantee because the lender does not verify the information you provide, meaning you may not actually get approved for that said amount. The lender is simply telling you that you would likely get approved for a loan up to that amount based on the unverified information.
This option has no fees, doesn’t affect your credit score and provides you with an estimate as to what you can afford. It’s a good starting point for first time home buyers, but you must keep in mind that a lot of sellers won’t consider you as a serious candidate until you’ve been pre-approved. If you’re not sure whether or not you can take on a mortgage or you’re not really ready to buy but want an idea as to where you stand, a pre-qualification is the better option. It’s a great way of starting the search process.
If you are pre-approved, it means that you have been approved for a specific loan amount by a lender who has reviewed and verified all of the financial information you have provided, including pay stubs, credit reports, and statements. You will receive an official confirmation letter stating the loan amount that you have been approved for. When you’re pre-qualified, you simply inform the lender of your financial situation, but a pre-approval requires that you actually provide documented financial information, which must be submitted for verification.
This option has no fees, allows you to close a lot faster and helps you know exactly what you can afford so you can proceed accordingly. A pre-approval indicates that you are serious about buying, so sellers will take you seriously compared to a potential buyer who is pre-qualified. The pre-approval letter will go a long way, but you will still have to wait for final approval. If you’re ready to purchase within 90-days, you should proceed with a pre-approval.
If you’re a first time home buyer and need guidance, Collin Bruce can help. A mortgage specialist can answer all of your questions and help you land your dream home with no down payment. If you’re looking for a reputable mortgage company in the Edmonton area and want a mortgage broker you can trust, contact Collin Bruce today!