Pre-qualification and Pre-approval letters both specify how much the lender is willing to lend to you, up to a certain amount and based on certain assumptions. These letters provide useful information about your likelihood of getting a loan but are not guaranteed loan offers.

Both relate to your status before you actually have the home loan in hand. Pre-qualifying for a mortgage isn’t as involved and it simply gives you an idea of whether you’ll qualify for a mortgage, and if so, approximately for how much and at what interest rate. On the other hand, getting pre-approved requires more legwork and indicates that the lender is committed to moving forward with your financing.

Lenders use the terms “pre-qualification” and “pre-approval” differently. Some lenders may use the word “pre-qualification,” while other lenders may call the letter a “pre-approval.” Some lenders offer a pre-qualification letter based on unverified information that you report and will only issue a pre-approval letter based on verified information. Some lenders may issue a written commitment letter valid for a certain period of time to extend a loan up to a specified amount subject to limited conditions.

Lenders’ processes vary widely, and the words they use don’t tell you much about a particular lender’s process even if it may result in legal differences. Both terms refer to a letter from a lender that says the lender is generally willing to lend to you, up to a certain amount and based on certain assumptions. This shows a realtor that you are a serious buyer and helps them to know which houses to show you within your price range. This letter additionally helps you to make an offer on a home, because it gives the seller confidence that you will be able to get financing to buy the home. It is not a guaranteed loan offer, but it should provide enough information for sellers in your area to take it seriously.

Lenders will generally run a credit check when issuing a pre-qualification or pre-approval letter. Many people wait to get a pre-approval letter until they are ready to begin shopping seriously for a home. However, getting pre-approved earlier in the process can be a good way to spot potential issues on your credit in time to correct them.

These are a general rule of thumb to consider before speaking with a lender. Please reach out if you would like some suggestions of lenders in your area that we have worked with and can recommend to you to get started on this process. We look forward to earning the opportunity to work with you and show you what is available on the market currently. We love showing homes.

 

Sierra Haskins

530-632-9028

The NorCal Life Real Estate Group

eXp Realty / Lic 02146483